Owner of Chicago Tribune, LA Times files for bankruptcy

NEW YORK (AP) — Tribune Co. — owner of the Los Angeles Times, Chicago Tribune, Baltimore Sun and other dailies — filed for Chapter 11 bankruptcy Monday, the first major newspaper publisher to take such a step since the Internet plunged the industry into a desperate struggle for survival.

The media conglomerate was smothered by a drop-off in advertising and a crushing $13 billion in debt from the company’s takeover a year ago by Chicago real estate mogul Sam Zell.

Chapter 11 would buy the Tribune Co. time to put its finances in order. Analysts said the company will almost certainly have to sell off some of its major holdings — and that could prove extremely difficult because of the bad economy and the poor outlook for newspapers.

“When you look at the near term, prospects for the company and the industry are certainly not very bright,” said Dave Novosel, an analyst with the Gimme Credit research firm.

Tribune Co. employees, who received an ownership stake in the company when Zell came in, could also see the value of their holdings wiped out.

Tribune Co., which has 20,000 employees, owns baseball’s Chicago Cubs as well as 10 daily newspapers, including The Hartford (Conn.) Courant and the Orlando (Fla.) Sentinel, cable channels and 23 TV stations. Its papers’ total circulation puts the Tribune Co. among the top three most-read newspaper groups nationwide.

Other newspaper companies have also struggled with heavy debt, a downturn in advertising and the loss of readers to the Internet, but the Tribune Co. was something of a special case.

“Tribune’s debt was so outsized and so disproportional to its cash flow compared to these other companies that it can be the sore thumb sticking out rather than an example of the industry,” said Ken Doctor, media analyst with Outsell Inc.

Most of the company’s debt comes from the complex deal engineered by Zell. The company’s lending agreements require it to keep its debt at a certain point relative to its cash flow. Those deals became harder to meet as revenue declined because of the poor economy and competition from the Internet.

Although the Tribune Co.’s next major debt payment is not due until June, the company was in danger of missing the financial targets set by its lenders.

To make a debt payment this year, the Tribune Co. sold the Long Island daily Newsday to Cablevision Systems Corp. for $650 million. The Tribune Co. already has made hundreds of layoffs at its papers and reduced the number of pages it puts out.

In related news, the McClatchy Co. has approached potential buyers to sell The Miami Herald, one of its most prestigious properties, The New York Times reported Saturday.

McClatchy, the nation’s third-largest newspaper chain, is courting potential buyers to unload one of its largest assets as it struggles with debt and advertising losses, the Times said in report published on its Web site, citing anonymous people briefed on McClatchy’s plans.