Tribune Co. filed for bankruptcy protection Monday, as the owner of the Los Angeles Times and KTLA Channel 5 tries to buy time to deal with $13 billion in debt.
The Chapter 11 filing in a Delaware bankruptcy court gives Chicago-based Tribune, which also owns the Chicago Tribune and Chicago Cubs baseball team, time to raise cash by selling off assets in a tight credit market. The company entered bankruptcy protection with $13 billion in debt and $7.6 billion in assets.
Advertising revenue declined severely this year due to the recession, putting pressure on Tribune, which owns 12 newspapers and 23 TV stations. Most of its debt comes from the complex transaction in which the company was taken private, with employee ownership, by real estate mogul Sam Zell last December.
“So, how did we get here? It has been, to say the least, the perfect storm,” Zell wrote in a memo to employees. “A precipitous decline in revenue and a tough economy have coupled with a credit crisis, making it extremely difficult to support our debt. All of our major advertising categories have been dramatically impacted.”
Tribune’s largest unsecured creditors are its lenders, led by JPMorgan Chase Bank and Merrill Lynch Capital Corp. JPMorgan is the administrator of $8.57 billion in senior debt and holder of about $1.05 billion of that. In its filing, Tribune said that it has retained Alvarez & Marsal, a restructuring adviser that is also working with Lehman Brothers.
The Los Angeles Times had endured a succession of cutbacks in recent years. The paper lowered its page count by 14 percent in July and layed off 235 workers, including 135 in the newsroom. Another 75 newsroom positions were cut in October.
An internal Q & A; to current and former staff obtained by
said severance payments, deferred compensation and other payments to former employees have been discontinued and will be the subject of later proceedings before the court.