Tribune Company, owner of major newspapers such as the Chicago Tribune, Los Angeles Times, The Sun, Orlando Sentinel and the Morning Call, filed for bankruptcy in the United States Bankruptcy Court, District of Delaware, on December 8, 2008. As reflected in the Tribune Company’s Bankruptcy Affidavit, Tribune is the largest employee-owned media and entertainment company in the United States with its newspapers reaching 80% of the households throughout the country. Tribune publishes 8 "major market daily newspapers" and operates television stations in 19 markets, 7 of which are in the 10 largest television markets in the United States.
Although Tribune’s operations are impressive, the financial data released in its Affidavit and Chapter 11 Bankruptcy Petition show the enormity of this bankruptcy proceeding. According to documents filed with the Court, the "Tribune entities" have $7.6 billion in total assets and $13.9 billion in total liabilities. Tribune’s List of Thirty Largest Unsecured Creditors, included in its bankruptcy petition, states that JP Morgan Chase Bank, as agent for various lenders, holds a claim for $8.5 billion.
Events Leading to Bankruptcy
Tribune’s bankruptcy reflects the challenges publishing companies are facing due to the overall recession and declining advertising sales. Industry-wide, Tribune estimates that newspaper advertising is down between 15 and 20 percent during the last year. Tribune’s ad revenue from television is also down compared to last year. Combined, the drop in sales for advertising on television and in print has resulted in Tribune experiencing a 33% decline in operating cash flow.
Tribune’s loan payments for December total $200 million, and loan payments for 2009 total $1.3 billion. To improve its financial situation, Tribune sought to implement general "cost savings" such as reducing its workforce, as well as reducing the size of the pages in its papers. Further, the company sought to improve revenue through increasing the hours of its television programming and printing and delivering other companies’ newspapers. Tribune also is seeking buyers for its Chicago Cubs baseball team and the Tribune Tower in Chicago, along with the Times Mirror Square building in Los Angeles.
The Tribune bankruptcy proceeding is before the Honorable Kevin J. Carey, Chief Judge of the Delaware Bankruptcy Court (read Judge Carey’s Chamber Procedures here). Debtors are represented by Cole Schotz, who serve as Delaware counsel, and Sidley Austin in Chicago.
It will be interesting to see how Tribune proceeds in this bankruptcy. Its debt service is huge, yet its market continues to decline. The "breathing room" provided to debtors under the Bankruptcy Code does not last indefinitely. In the months ahead, we should have a better sense on whether its lenders are willing to make the concessions necessary to allow Tribune to reorganize its debt.