What a weekend for South Florida newspapers -- a very bad one. The Miami Herald is up for sale and Tribune Co., the parent of the Sun-Sentinel, is preparing for what may be inevitable bankruptcy.
The Wall Street Journal is reporting that the media company -- which counts among its properties the Los Angeles Times and Chicago Tribune -- could file for bankrupcy as early as this week. Reuters fills us in on the Journal report:
Tribune Co., whose newspapers include the Chicago Tribune and Los Angeles Times, in recent days has hired Lazard Ltd. as its financial adviser and a legal counsel for a possible trip through bankruptcy court, the paper reported, citing people familiar with the matter.
... Tribune so far has stayed ahead of its $12 billion in borrowings with the help of asset sales, but dwindling profits are now tightening the noose, it said. The company's cash flow may not be enough to cover nearly $1 billion in interest payments this year, and Tribune owes a $512 million debt payment in June, the paper said.
And this from the New York Times DealBook blog:
Tribune has hired bankruptcy advisers as the ailing newspaper company faces a potential bankruptcy filing, people briefed on the matter said.
The newspaper, which was taken private last year by billionaire investor Samuel Zell, has hired advisers including Lazard and Sidley Austin, one of its longtime law firms, these people said. Tribune has been hobbled by debt related to that sale last year, which has been compounded by the growing drought of advertising for newspapers.
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ADDED: The best report is coming from the Chicago Tribune, which has the advantage of being a little closer to the source. It cites a deadline the company faces TODAY to pay off $70 million in debt: "Tribune Co., which has been struggling under a $13 billion debt load incurred last December when real estate magnate Sam Zell took the company private in an $8.2 billion leveraged buyout, faces a Monday deadline on $70 million of unsecured debt taken on by Tribune Co. before the deal. Sources said the company could draw on an existing line of credit with its senior lenders to pay the bill."
So Tribune might have to borrow to pay its borrowings. Not a good position.
We all saw this coming, just not this fast. Understand that this doesn't mean the company is necessarily going out of business (though that is a distinct possibility). It means it will get a chance to stave off creditors and restructure its debt. But with that, usually, comes very deep cuts and asset sales. The Sentinel (and the Herald, for that matter) are profitable newspapers, just not as profitable as they used to be. It's their parents who are drowning in debt. In all likelihood, Tribune will be broken up for parts -- and that means that somebody might soon have the chance to buy the Herald and Sentinel at what might seem like bargain prices.
In business terms, it's intriguing. In human terms, it's scary. But seriously -- can the Sentinel have any worse owners than it has now? We may find out sooner than we expected.