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The new owners of Tribune Co. are betting that television is the key to its future.
With 23 local TV stations in 19 cities, including KTLA-TV Channel 5 in Los Angeles, and a national cable network, Tribune has an array of potentially strong properties that will be the foundation of the newly constituted company.
Its television station group has been valued at close to $3 billion. In 2011, Tribune's broadcasting operations had revenue of $1.1 billion.
"Those stations are great properties in wonderful markets," said Alan Bell, a veteran broadcast industry executive. "There is a real opportunity there if sharp management steps in and really pulls up their socks."
Tribune emerged from bankruptcy Monday with new ownership and a new board of directors, several of whom are entertainment industry veterans. Peter Liguori, a former top Fox and Discovery Communications executive, was named to the board and is expected to become chief executive of the new company later this month.
The new Tribune, which will continue to be based in Chicago, is likely to be smaller than its current incarnation. In the next few months, Tribune's board plans to scrutinize the assets to see whether they should be sold or remain within the company, according to people involved in the process.
Analysts believe that Tribune's eight newspapers, which include the Los Angeles Times and Chicago Tribune, will eventually be sold. Potential suitors for The Times include Rupert Murdoch's News Corp. and Aaron Kushner, a former greeting card executive who bought the Orange County Register and a string of other California newspapers last year.
Also in the mix is Austin Beutner, a former venture capitalist and ex-deputy mayor of Los Angeles. He told The Times in October that he had begun reaching out to civic-minded investors who would be willing to put up money to acquire the news organization.
However, members of Tribune's leadership said they did not plan to sell assets immediately. Instead, they would like to spend several months reviewing each asset's prospects and potential.
Tribune sought Bankruptcy Court protection in December 2008. A leveraged buyout by real estate magnate Sam Zell had saddled the company with $12.9 billion in debt as the U.S. economy entered recession and advertising revenue collapsed.
Tribune's post-bankruptcy debt was reduced to $1.1 billion, plus a $300-million credit line.
"We did not put a lot of debt on the reorganized company, which provides us an option," said Kenneth Liang, a managing director at Oaktree Capital Management, the Los Angeles investment firm that owns roughly 23% of the remade Tribune.
"It allows us either to hold or sell existing assets or acquire additional assets," Liang said. "But we're not going to be forced into a decision because of financial constraint."
Tribune's newspapers, TV stations and other holdings have a combined value of about $4.5 billion, according to an analyst's estimate filed in Bankruptcy Court. The newspapers were valued at about $623 million in April, a significant decline from their value even one year earlier, the report said.
"It's way worse now than it was four years ago" for the newspapers, said Craig Huber, a media analyst with Huber Research Partners in Connecticut. "We have had four additional years of compounded declines for newspaper advertising."
In addition to KTLA, Tribune owns WPIX-TV New York, WPHL in Philadelphia and WGN-TV in Chicago, which has the distinction of being both a local station and a national cable channel.
People familiar with the thinking of Tribune's new controlling owners — hedge funds Oaktree Capital Management and Angelo, Gordon & Co. and investment bank JPMorgan Chase & Co. — said rejuvenating the TV stations and improving WGN's programming were top priorities.
The Tribune stations have suffered from a bad economy, which depressed local advertising spending, and also from the parent company's ongoing financial woes and persistent management changes at the local stations.
"They haven't been run very well," Bell said.
But local advertising, the engine of any television station, has improved in recent months. Car manufacturers and dealerships — heavy buyers of local television time — have resumed spending.
"Television is the most powerful advertising medium on the planet, and in local markets, television advertising remains very effective," said Steve Ridge, president of the media strategy group for the consulting firm Frank N. Magid Associates.
Tribune is expected to maintain its 30% stake in the profitable Food Network, but will charge Liguori with boosting ratings for WGN America, the national cable channel that is a sister property to WGN-TV. It carries Chicago sports teams including the Bulls, Cubs and White Sox and a heavy diet of old TV shows. On New Year's Day, for example, it has programmed a marathon of "Cheers" reruns.