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Tribune Co. close to default

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Posted by chicagomedia.org on June 18, 2008 at 09:22:17:

Continued advertising losses may be pushing Tribune Co. closer to default on the billions in debt it assumed when the Chicago-based media giant went private, Bloomberg News reported.
Debt and asset sales might not be enough to stave off Tribune defaulting on its loans by yearend, according to Standard & Poor's analyst Emile Courtney. “In the absence of additional asset sales, we think that it's a possibility as early as December,”' Mr. Courtney told Bloomberg.

A Tribune spokesman referred to a remark Mr. Zell made in an April 17 investor call: “It does not appear that we will have difficulty meeting our commitments going forward.”

The Newspaper Assn. of America said industry first-quarter ad sales dropped for the eighth-straight period by the biggest percentage in 37 years.

Mr. Courtney said that Tribune may fall short of the cash it needs to meet terms of the loans on its leveraged buyout. Earlier this month, Gimme Credit LLC labeled the debt situation “deteriorating,” and the firm recommends selling Tribune bonds.

And without enough cash, some newspaper companies may end up being pushed into bankruptcy, said Mark Young, president of Massachusetts investment bank Grist Mill Advisors. “These companies built their portfolios using leverage and executing a strategy with an investment thesis that was clearly flawed,” he said. “Almost all of these are going to have to go through a restructuring or bankruptcy to come out the other side.”

In a June 5 conference call updating bondholders on company finances, Tribune CEO Sam Zell and Chief Operating Officer Randy Michaels suggested Tribune is headed for more downsizing. The company is considering printing fewer pages, aiming for a 50-50 ad to editorial ratio, and tracking reporters’ productivity by the amount of copy they produce.

Among other measures to cut Tribune’s $13-billion debt, the media company struck a deal to sell its New York Newsday last month for $632 million. Mr. Zell said on the call that the newspaper sale and a planned asset-backed commercial paper program will generate $900 million, which should “satisfy our principal-amortization requirements” through yearend.

Still, S&P’s Mr. Courtney said Tribune may fall out of compliance with its debt requirements. Bond research firm CreditSights Inc. said the company, with debt of 8.1 times cash flow at the end of the first quarter, must keep the ratio below 9 times for the rest of the year.

(Crain)

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: Continued advertising losses may be pushing Tribune Co. closer to default on the billions in debt it assumed when the Chicago-based media giant went private, Bloomberg News reported. : Debt and asset sales might not be enough to stave off Tribune defaulting on its loans by yearend, according to Standard & Poor's analyst Emile Courtney. “In the absence of additional asset sales, we think that it's a possibility as early as December,”' Mr. Courtney told Bloomberg. : A Tribune spokesman referred to a remark Mr. Zell made in an April 17 investor call: “It does not appear that we will have difficulty meeting our commitments going forward.” : The Newspaper Assn. of America said industry first-quarter ad sales dropped for the eighth-straight period by the biggest percentage in 37 years. : Mr. Courtney said that Tribune may fall short of the cash it needs to meet terms of the loans on its leveraged buyout. Earlier this month, Gimme Credit LLC labeled the debt situation “deteriorating,” and the firm recommends selling Tribune bonds. : And without enough cash, some newspaper companies may end up being pushed into bankruptcy, said Mark Young, president of Massachusetts investment bank Grist Mill Advisors. “These companies built their portfolios using leverage and executing a strategy with an investment thesis that was clearly flawed,” he said. “Almost all of these are going to have to go through a restructuring or bankruptcy to come out the other side.” : In a June 5 conference call updating bondholders on company finances, Tribune CEO Sam Zell and Chief Operating Officer Randy Michaels suggested Tribune is headed for more downsizing. The company is considering printing fewer pages, aiming for a 50-50 ad to editorial ratio, and tracking reporters’ productivity by the amount of copy they produce. : Among other measures to cut Tribune’s $13-billion debt, the media company struck a deal to sell its New York Newsday last month for $632 million. Mr. Zell said on the call that the newspaper sale and a planned asset-backed commercial paper program will generate $900 million, which should “satisfy our principal-amortization requirements” through yearend. : Still, S&P’s Mr. Courtney said Tribune may fall out of compliance with its debt requirements. Bond research firm CreditSights Inc. said the company, with debt of 8.1 times cash flow at the end of the first quarter, must keep the ratio below 9 times for the rest of the year. : : (Crain)

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