Capitulating to a 24 percent year-to-third-quarter revenue decline and a debt load recently reported at $11.8 billion, Tribune Co. — owner of The Baltimore Sun, seven other major dailies and 23 broadcasting stations — filed for Chapter 11 bankruptcy relief in Wilmington, Del., on Monday.
The move — a voluntary reorganization under U.S. bankruptcy law that retains the present management — will allow the employee-owned media conglomerate to request relief from debt service while it continues operations in hopes the economy, and its ad revenues, will turn around.
It also gives Tribune, which went private in January in a complex, $8.2 billion deal, time to sell its varied assets — including the baseball team Chicago Cubs and Wrigley Field stadium — to pay down its debt. The baseball properties are not included in the filing.
“We hope this is a move for The Sun to be purchased by local ownership,” said Cet Parks, executive director of the Washington-Baltimore Newspaper Guild, “Tribune is just cutting staff and covering less.”
“The reaction here is that it might be an opportunity for somebody locally to buy us if [Tribune] decides to start selling assets,” added Angie Kuhl, guild unit co-chair at The Sun. “It’s the silver lining for us.”
Parks deflected questions about the company’s employee stock ownership plan — formerly employee retirement accounts that were used to fund the company’s privatization — which could become worthless if the reorganization ultimately results in Chapter 7 liquidation.
Guild members are not part of the ESOP, Parks said, and maintain their separate retirement accounts. Reorganization, however, technically is a first step for a company to invalidate labor agreements.
“We believe that this restructuring will bring the [debt] level in line with current economic realities,” Tribune Chairman and Chief Executive Officer Sam Zell said in a news release, “and will take pressure off our operations.”
Reportedly, the company’s next major debt payment — $593 million — was not due until June, but with only $7.6 billion in assets and the crushing debt persisting in a souring economy, Zell apparently opted for a strategic withdrawal.
“It was not entirely unexpected,” said Maryland-based media consultant John Morton, “and it’s going to give Zell a chance to try to sort out his debt obligations in a way that they can meet them.”
Ted Venetoulis, spokesman for an investor group interested in buying The Sun, said the group remained interested, but at an adjusted offer.
