Tribune Company, the owner of the Chicago Tribune and the Los Angeles Times, two of the most powerful newspapers in the US, has filed for bankruptcy protection, after buckling under the weight of huge debts.
Its collapse is a miserable sign of the pressures on the newspaper industry, in the midst of an advertising recession, and a humiliation for Sam Zell, the billionaire property magnate who bought the company last year.
Tribune was loaded up with $13bn (£8.7bn) in debt as part of the takeover, and the bankruptcy filing yesterday came after Mr Zell had failed to find common ground in emergency talks with the company's creditors.
The future of the company's 12 newspaper titles and 24 local television stations is now uncertain. One possibility is a series of auctions of the individual businesses, the proceeds of which could be used to satisfy creditors.
Lazard, the investment bank, had been hired by Tribune to prepare for a possible bankruptcy filing, along with the law firm Sidley Austin.
Bank of America, JPMorgan Chase, Merrill Lynch and Citigroup bankrolled Mr Zell's complex takeover bid in April 2007 – just before the credit markets froze up and the US began slipping towards recession. Covenants on the debt require Tribune to post a certain level of earnings before write-downs, stipulations that the company looked unlikely to meet when they are next calculated at the end of the year.
Tribune said yesterday that it would continue to publish its papers, and its TV stations would continue broadcasting as normal. The company also owns the Chicago Cubs baseball team, which has been up for sale and is not included in the bankruptcy filing.
The group's journalists initially cheered their new proprietor, since he promised an end to a period of convulsion. The company's biggest shareholder, the Chandler family, which sold the LA Times to Tribune in 2000, had been in open rebellion because of the sliding share price, and both the publisher and the editor of the LA Times had been fired after refusing to implement cost cuts demanded from the company's Chicago headquarters. Mr Zell had earned the nickname "The Gravedancer" for his fondness for acquiring companies in distress and turning their fortunes around, but the mountain of debt loaded on to Tribune looked ill-advised even at the time.
The Chicago Tribune and the LA Times are among the 10 best-selling titles in the US, but circulations have slipped and advertising sales slumped. It sold the New York paper Newsday and cut staff and other expenses at all the group's titles. It posted a $124m loss in the third quarter of the year, and has $1bn in debt payments due.
News of Tribune's bankruptcy came as its rival newspaper giant The New York Times Company said it plans to borrow up to $225m against its Manhattan headquarters building, which opened a year ago. It also has $1bn in debt to repay. Tribune said it had nearly $13bn in debt, compared to $7.6bn in assets.Reuse content