Tribune Co. files for bankruptcy

Posted by Leah McBride Mensching on December 8, 2008 at 4:36 AM

Tribune Co. filed for Chapter 11 bankruptcy on Monday, The Wall Street Journal reported.

Tribune owes a US$512 million payment on its debt in June, and its cash flow is unlikely to cover the nearly $1 billion in interest payments due by the end of this year, according to the article.

According to The Wall Street Journal, one of the top worries for Tribune is that it "is likely to be in violation of debt terms that limit borrowings at the end of the year to nine times its adjusted profits. The ratio stood at 8.3 at the end of the second quarter, before Tribune reported an 83 percent decline in operating profit for the three months ended Sept. 28."

Also Monday, Tribune Co. made a $70 million payment due on borrowings before real estate magnate Samuel Zell took the company private in December 2007, the Chicago Tribune reported. However, the company "was unable to convince lenders to embrace a broader restructuring of its debt."

The Chicago-based Tribune hired both investment bank Lazard Ltd. and law firm Sidley Austin to advise it on a bankruptcy filing, The Wall Street Journal reported, citing people familiar with the matter.

Tribune owns eight large daily newspapers across the United States, including the Chicago Tribune and the Los Angeles Times, as well as several local TV stations.

Although Tribune has kept up with payments on the $12 billion debt incurred from going private, sliding ad sales and circulation, exacerbated by the poor economic climate, is putting the squeeze on the debt-heavy company.

Tribune is also trying to sell another one of its assets, the Chicago Cubs baseball team, and although it could sell some of its newspapers, sale prices are low, and buyers are few, according to The Wall Street Journal.