US: "Perfect storm" in economy has Tribune Co. filing for bankruptcy

Posted by Rosemary D'Amour on December 9, 2008 at 10:46 AM

Newspaper and television organization the Tribune Company filed for bankruptcy on Monday, with owner Samuel Zell promising there would be "no effect" on employees' payroll and benefits.

The news organization, which publishes The Chicago Tribune and The Los Angeles Times, is $13 billion in debt, faced what Zell called the "perfect storm" of a failing economy and advertising market.

Zell announced the decision less than a year after taking control of the organization of 12 newspapers, 23 television stations, a national cable channel and other media holdings.

Rick Edmonds, a media business analyst at the Poynter Institute, said that Zell took on "a huge amount of debt at just the wrong time," and that Tribune's heavy debt burden is "unusual" and not an indication for what's to come for the newspaper industry.

Tribune's financial problems were made "significantly worse" by an $8.2 billion deal early in 2008 that made the company private and nearly tripled its debt, according to the New York Times.

The chain has already made cuts in its staff and its products to "stay ahead" of debt payments. The filing will work more as "protection," Zell said, and the restructuring focuses on the company's debt, and not its operations.

Filing for bankruptcy is a "rare move" for a major newspaper, and "calls into question the future shape of a company," the Times said. Zell took control of the chain and installed top managers who also had "no background in newspapers." The proposed "shake up" of the company still had negative results reflecting the industry as a whole, according to the Times.

The filing under Chapter 11 of the bankruptcy code allows the company to continue operating and negotiating with lenders to "try and reduce its interest payments and possibly its debt," the Times reports.

Source: New York Times