UPDATED: Black Monday -- Tribune Co. Files for Bankruptcy

By: E&P Staff Following reports of trying to avoid this step, The Tribune Company filed for bankruptcy protection in a federal court in Delaware on Monday.

In a court filing, The New York Times reports, Tribune said it had nearly $13 billion in debt, compared to $7.6 billion in assets. "Most of that debt was taken on when Mr. [Sam]Zell acquired the company ? a deal he struck using mostly borrowed money."

Tribune chief Zell has released a statement: "Over the last year, we have made significant progress internally on transitioning Tribune into an entrepreneurial company that pursues innovation and stronger ways of serving our customers. Unfortunately, at the same time, factors beyond our control have created a perfect storm -- a precipitous decline in revenue and a tough economy coupled with a credit crisis that makes it extremely difficult to support our debt."

The Times story related: "While Tribune must contend with hefty interest payments over the next year, its most pressing problem is a maintenance covenant on some of its debt that limits the company?s borrowings to no more than nine times earnings before interest, depreciation and amortization.

"Even if the company continues to make interest payments, failure to maintain that level of debt means technical default ? which does not always lead to a bankruptcy filing. Other newspaper publishers have halted making interest payments on their debt, but have yet to file."

See other stories on our site for analysis, as well as the Fitz & Jen blog. More to come.:"

The Chicago Tribune reports: "In a news release, the company said the Chicago Cubs franchise, including Wrigley Field, was not included in the Chapter 11 filing. Efforts to monetize the Cubs and its related assets will continue, the company said."

More from the New York Times: "The top creditors listed by Tribune in its court filing include big banks like JPMorgan Chase, Merrill Lynch and Deutsche Bank. JPMorgan listed some of the firms it had syndicated its debt to as well; that list comprises private investment firms like Kohlberg Kravis Roberts?s KKR Financial, Highland Capital Management and Davidson Kempner Capital Management."

Zell sent the following memo to employees this afternoon.
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December 8, 2008

Partners,

We just announced that Tribune is restructuring its debt under Chapter 11 protection. I'm sure you saw the speculative coverage last night and this morning. I would have preferred everyone get the news from me first, but since our debt is publicly traded, we had to keep this decision confidential until we had a formal board decision. The Cubs franchise is not part of the filing.

Most importantly, I want to stress that we will continue to operate our business as usual. That includes meeting payroll and covering benefits (such as healthcare, disability and others), and paying vendors for all goods and services they provide to us going forward.

As is routine with Chapter 11 filings, we have filed "First-Day Motions" to get court approval on these and many other programs that are essential to continuing our businesses without disruption. We expect to get approval on these motions within the next few days.

You are also most likely wondering about the other aspects of your compensation. The 401(k) is unaffected by the filing, and in general, the existing benefits in the pension and cash balance plans are also unaffected by the filing. The ESOP is part of the ownership structure, so its value and role long-term will be determined in the restructuring. We believe the structure is a valuable asset to the company and that there are strong reasons to preserve it.

So, how did we get here? It has been, to say the least, the perfect storm. 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.

By restructuring our debt, we will reduce the pressure on the company's operating businesses, enabling us to pursue our vision of creating a sustainable, cutting-edge media company that is valued by our readers, viewers, and advertisers, and that plays a vital role in the communities we serve.

This filing should not impact the way you do your jobs on a day-to-day basis. We will continue to operate responsibly in a challenging environment ? aggressively managing costs and maximizing revenue opportunities. These are all things we would do whether or not we were restructuring our debt.

Our challenges are consistent with those facing all media companies, and an increasing number of companies across a variety of industries today. The reality is that we ? along with the rest of the country ? have very little visibility on where the economy is headed and how our businesses will perform given the recession.

The good news is that we have great brands, and we produce great products every day. It's up to all of us to continue to focus on what it is we do best.

As your Chairman and CEO, I will continue to be actively engaged in the business and I remain committed to the company, to you and to our lenders. Randy, Gerry and the rest of the management team are equally dedicated to moving this company forward.

I'm sure you have a lot of questions that this email doesn't cover. I encourage you to visit TribLink where we've posted some anticipated Q&A, or call the toll-free number we've established ? 888-287-7568. We'll also have information posted on Tribune.com. But, recognize that there is quite a bit we don't know ? or that we cannot confirm ? at this point.

I am proud of the work we have done at Tribune in the last year. I've seen strong determination to take hold of this company and put it on a new course. As a result, we've reduced costs, gained market share, and laid the groundwork for creating a new business model out of traditional media. This restructuring will give us the time we need to build that model, to secure sustainable and growing cash flow, and to achieve the success the talented partners in this company deserve.

Sam