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Chicago's Tribune Co., owner of the Chicago Tribune and Los Angeles Times, filed for Chapter 11 (reorganization) bankruptcy in Wilmington, Delaware today (Dec. 8). The company has $7.6 billion in assets and $13 billion in debt. The Chicago Cubs baseball team, part of Tribune Co., is not part of the filing. (This could possibly help the Padres's chances of trading star pitcher Jake Peavy to the Cubs.) The huge debt load largely came from a deal a year ago in which real estate mogul Sam Zell took the company private without plunking much of his own money into the pot. In theory, the company is greatly employee-owned. The Tribune has been in danger of missing lender-imposed financial targets at the end of this year. The targets are based on debt relative to cash flow. Zell said the company's newspapers and broadcast operations will continue operating as before. Zell told employees that, "A precipitous decline in revenue and a tough economy have coupled with the credit crisis, making it extremely difficult to support our debt." Among Tribune lenders are some of the financial industry's sickest financial concerns: Merrill Lynch, Barclay's, JP Morgan Chase, and Deutsche Bank. If Tribune dumps some newspaper assets in bankruptcy, the chances of Copley Press to unload the Union-Tribune could possibly worsen.

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Comments

Visduh Dec. 9, 2008 @ 10:07 a.m.

So Zell says that ". . . the company's newspapers and broadcast operations will continue operating as before." You believe that, and you must also believe in Santa Claus. If there is insufficient cash coming in, and the debt cannot be serviced, something will give. That will be expenses, and they will be cut wherever possible.

For those readers who keep looking to the LA Times for "real news" can start to get ready to see it slip even further. And as Don points out, David Copley may continue to own the U-T for a long time, whether he likes it or not.

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Don Bauder Dec. 9, 2008 @ 11:43 a.m.

Response to post #1: Zell probably means that the properties will continue to operate until they are unloaded. The company could get money for the radio-TV operations, but not that much. I don't know if it could unload the papers. As to the U-T, there are still rumors that a sale might be near, although not by yearend. I have doubts about those rumors....UNLESS David is willing to let go of the assets for a very lowball price -- say, $15 million more than the real estate value, as rumored. Again, that is rumor, too. Best, Don Bauder

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JohnnyVegas Dec. 9, 2008 @ 2:05 p.m.

The Tribune bought out numerous employees over te last 6 months, and they are stopping ALL payments to thoe employees.

That is a lesson I will keep in my back pocket for the future-NEVER take a buy out/deferred compensation unless it is securitized by real estate and you're the 1st Trust Deed on it.

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Don Bauder Dec. 9, 2008 @ 2:16 p.m.

Response to post #3: I hadn't heard that. Remember, too, that an ESOP had equity in Tribune. I have heard that has been wiped out, as would be normal in a bankruptcy. The employees have been totally abused, it appears. So what else is new? Billionaire Zell will come out fine. Best, Don Bauder

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Shadow Dec. 9, 2008 @ 4:27 p.m.

Whatever happened with the lawsuit against Zell & Co. filed by some of the high-profile writers (including Pulitzer winner Dan Neil) at the Times?

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Don Bauder Dec. 9, 2008 @ 8:10 p.m.

Response to post #5: I am checking that out. There is a big story in the NY Times today (Tues.) but I haven't read it yet. It should have info on the ESOP, the buyouts and possibly the suit by employees. Best, Don Bauder

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Don Bauder Dec. 10, 2008 @ 9:11 a.m.

TRIBUNE ESOP WIPED OUT; EMPLOYEES RECENTLY LAID OFF OR THOSE TAKING BUYOUTS GO TO THE BACK OF THE LINE: Here is some more on the Tribune bankruptcy, as culled from the Tuesday (Dec. 9) story in the NY Times. Under Sam Zell's original deal, an employe stock ownership plan (ESOP) was set up. That made the company tax-exempt, and made employees the titular owners. But they never had any management control. They were told they would eventually have access to shares in the company. However, the possibility of ever getting those shares has probably been erased by the bankruptcy. Here's the scary one, as related in the Times: a note on the Tribune website said, "All ongoing severance payments, deferred compensation and other payments to former employees have been discontinued and will be the subject of later proceedings before the [bankruptcy] court." It's apparent that employees who were recently laid off, or took buyouts, go into the long line of unsecured creditors. Best, Don Bauder

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HellcatCopley Dec. 10, 2008 @ 9:44 a.m.

Surely the four color printing presses alone are worth more than $15 million. They are relatively new, with Copley having installed them less than 10 years ago.

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Don Bauder Dec. 10, 2008 @ 12:40 p.m.

Response to post #8: Good point. First, of course, we don't know if the deal may actually be for $15 million above the real estate value. And we don't know if the value of the presses is included with the real estate. Best, Don Bauder

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