Tribune Co.: Work in Progress

The Tribune Company’s famed media properties are losing circ and bleeding red ink. Can Lee Abrams fix a mess this big?

On April 1, 2009, anyone who typed www.tribune.com into his favorite browser would have learned the big news surrounding The Accelerator. As the home page of the Chicago-based Tribune Company’s Web portal explained, The Accelerator was “a high-power, low-cost communications device” that would “make all media, including the Internet, obsolete by next year.” It used “nano-technology to aggregate the sum of all human knowledge” in order to deliver it “directly into your brain.” The project won the effusive praise of Tribune COO Randy Michaels, who credited staffers with putting in “long hours, many of them sober.”

The Accelerator was also, of course, an April Fool’s Day prank.

“Yes, I was involved in writing some of that silliness,” confesses Lee Abrams, the company’s chief innovations officer. In truth, however, The Accelerator was far, far more than an April Fool’s gag. It was emblematic of just how far the once supremely buttoned-up Tribune Company—which roosts within an 84-year-old Gothic-revival tower downtown—has come in the past year or so. Back in the day, for the Tribune to give anything as public as a home page over to a prank would have been about as likely as finding white-linen tablecloths at the Billy Goat Tavern. [Click for MORE]

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Severance Payments Denied At Tribune; Bonuses Approved

Tribune severance payments denied

A bankruptcy judge denied authorization for Tribune to make severance payments to employees laid off shortly before the bankruptcy filing but approved bonuses for other employees.

MediaNews will 'move away' from making print free on Web

MediaNews Group CEO William Dean Singleton and President Jodi Lodovic announced to employees recently a plan to provide less print content on the Web for free and differentiate Web site news from the print product.

Gannett's biggest shareholder sells nearly all shares

At the end of 2008, international insurance company AXA S.A. was the single-largest institutional holder of Gannett Co. stock with nearly 31 million shares, a 13.37% stake. Monday, it disclosed that it has sold nearly all of its holdings.

Is New York Times Co. headed to bankruptcy?

In an analysis posted on the Silicon Alley Insider blog Friday, the former star stock analyst Henry Blodget concludes The New York Times Co. is heading toward bankruptcy.

Metro to sell Seabay its U.S. papers

Swedish newspaper group Metro International SA said it agreed to sell its unprofitable U.S. papers.

No News Is Bad News in 'The Scarecrow'

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• Excerpt: "The Scarecrow"

Denver Post now printing Fort Collins Coloradoan

The Denver Post today is printing the Fort Collins Coloradoan and the copies of USA Today that once rolled off the Coloradoan's press.

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Tribune Considers Design, Copy Editing Functions to Be ‘Manufacturing’

From VisualEditors.com:

Yesterday’s statement by the Washington-Baltimore Newspaper Guild makes an interesting point. You’ll find it in the second sentence of this quote by Cet Parks, the guild’s executive director:

Tribune, through careless management practices, has saddled itself under $13 billion in debt and now Baltimore is paying a price. Tribune is siphoning good jobs from Baltimore and sending work that talented editors, reporters, photographers, copy editors and designers have done here to its home base in Chicago. That is not right.

Oh, it’s worse than that, Cet. A staffer at another Tribune paper — who wishes to remain anonymous, for obvious reasons — tells us copy desks all over six Tribune-company papers are being gutted:

Reporters and line editors are being told that their copy has to be clean enough to publish because it may not get another read. Word is the copy desk is only going to read copy for the section fronts, and they’ll get to the rest of the paper if time permits.

As if newspapers didn’t have enough problems retaining readers as it is. One big advantage newspapers — and newspaper web sites! — have over a common blogger is their fact-checking, proofreading and accuracy safeguards.

And now we’re cutting back on those. [Click for MORE] Sphere: Related Content

Zell Admits ‘Mistake’ in Tribune Co. Purchase

The company is looking at all its options


From Crain's ChicagoBusiness.com:

Sam Zell admits that taking over Tribune Co. hasn’t gone according to plan and was a “mistake.”

“The definition if you bought something and it’s now worth a great deal less, you made a mistake,” he told Bloomberg Television [VIDEO at 10:11 and 14:30] on Wednesday. “And I’m more than willing to say I made a mistake. I was too optimistic in terms of the newspaper’s ability to preserve its position.”

The Chicago billionaire, who made his fortune from commercial real estate, was instrumental in taking the parent of the Chicago Tribune and Los Angeles Times private through a complex deal that saddled it with $13 billion in debt. Tribune Co. filed for Chapter 11 bankruptcy protection in December, a move Mr. Zell said in Wednesday’s interview was necessary to “stop the bleeding and preserve a great company.”

The process that Mr. Zell used to take Tribune private caught the attention recently of the U.S. Department of Labor, which last month subpoenaed the company for documents related to its Employees Stock Ownership Plan, now the sole owner of Tribune Co.

Mr. Zell said he was unprepared for how quickly and steeply the newspaper industry has deteriorated.

“We underwrote the Tribune (deal) based on the fact that over the previous five years, we had seen an erosion of about 3%,” he told Bloomberg; he didn’t specify the losses to which he was referring. But in the months before filing for bankruptcy protection, the company saw a 25% decline, losses that “in a leverage business are just insurmountable.” He called the figure “significantly larger” than expected.

He said the company is looking at all its options, but he ruled out the possibility of a merger.

“That’s like asking someone in another business if they want to get vaccinated with a live virus,” he said. “I don’t think there’s a long list of people who want to buy a newspaper company today.”

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Tribune ESOP Leads to Subpoena

By SHIRA OVIDE
The Wall Street Journal

The U.S. Department of Labor has subpoenaed Tribune Co. in an investigation connected to the media company's employee stock-ownership plan, a key but controversial feature of real-estate mogul Sam Zell's 2007 deal to take Tribune private.

Tribune disclosed the investigation in a bankruptcy court filing on Thursday. The company, which publishes the Chicago Tribune and Los Angeles Times newspapers and owns a string of local television stations, tipped into bankruptcy protection in December under the weight of $13 billion in debt related to Mr. Zell's $8.2 billion buyout of Tribune.

Tribune on March 31 turned over an "extensive range of documents" in response to the subpoena, the court filing said. The probe concerns Tribune's employee stock ownership plan, or ESOP. Mr. Zell's buyout deal involved a complicated structure under which the ESOP became the majority owner of the company, a feature that helped Tribune avoid corporate taxes.

"We view this as a routine inquiry and we are responding by producing the requested documents concerning the ESOP," Tribune said in a statement. A spokeswoman for the Labor Department declined to comment, in line with agency policy to neither confirm nor deny investigations.

The court filing said the Labor Department probe concerns the Employee Retirement Income Security Act, a federal law that aims to safeguard participants in employee retirement plans by, among other things, requiring disclosure of funding details and risks.

The Tribune ESOP played a crucial and unusual role in Mr. Zell's deal for Tribune. The plan borrowed the billions of dollars used to finance the deal and in turn received all of Tribune's common shares. The company has said the value and fate of the ESOP will be determined in bankruptcy court, though stock is typically wiped out in the bankruptcy process.

Tribune's ESOP already is the subject of a lawsuit filed by current and former company employees. The lawsuit, filed in September, alleges Tribune and Mr. Zell failed to uphold their fiduciary duty to the ESOP.

On top of its bankruptcy filing, Tribune has become embroiled in other matters. The company has been caught up in the criminal probe of Rod Blagojevich, the former Illinois governor who allegedly sought to pressure Tribune to fire Chicago Tribune editorial staffers in exchange for help with a state-financed deal to sell Wrigley Field.

Tribune owns the Chicago Cubs baseball team and Wrigley Field, the team's home stadium. Mr. Zell, Tribune's chairman and chief executive, has been interviewed by federal prosecutors building their case against Mr. Blagojevich.

Jenner & Block LLP, a Chicago-based law firm helping Tribune respond to the Labor Department subpoena, also is representing Mr. Zell in the Blagojevich probe.

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By 'Optimizing' Ads, Can the Rubicon Project Save Newspapers?

The L.A. firm says its technology, which helps match ads to Web page content, could boost revenue by 60%. This could be the way to make money on online news.

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Stefano Paltera / For The Times

“We want to be the Visa, the Nasdaq of online advertising,” says Frank Addante, co-founder and CEO of ad optimization service the Rubicon Project.

By Dan Neil
Los Angeles Times

This promises to be the Silent Spring for big print media. Already this year we've lost the Rocky Mountain News and the Seattle Post-Intelligencer. Dozens of other papers have been driven to the brink by double-digit losses in circulation and print advertising revenue and an overburden of untenable corporate debt. My beloved L.A. Times, owned by the bankrupted Tribune Co., is bleeding reporters and editors from every orifice, despite the fact that the paper's readership -- online, at least -- is through the roof.

Not surprisingly, the news release from the L.A.-based Rubicon Project promising to help newspapers "find money" online caught my eye, as a flotation device attracts the casual interest of a drowning man. With the Rubicon Project's technology, says Frank Addante, the 32-year-old co-founder and chief executive, newspapers and other "premium news" outlets can increase their online revenue by an average of 60% a year.

Could this be, I wondered, daring to hope, the Secret -- the means by which newspapers finally "monetize" their content? Is this the online oxygen for our asthmatic industry? [Click for MORE]

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David Byrne: No More News

The Tribune Company owns the Chicago Tribune, The Baltimore Sun, The Los Angeles Times, the Chicago Cubs, a bunch of TV stations and some other regional newspapers. They’re just barely holding on since being acquired in a takeover a year and a half ago by Sam Zell, a real estate billionaire. After the buyout, the Tribune’s editor left, as did a lot of its journalists and columnists. They reportedly weren’t happy with some of the changes that Zell had instituted. The paper had also acquired a relatively large debt. My guess is that after Zell bought the paper, his purchase price saddled the paper with debt; or rather, the paper’s employees — since its board members, like Zell, managed to avoid any personal debt.

I saw similar things happen in the music business in the early 80’s, as record companies merged and were taken over by other companies (Warner Bros. was absorbed by Time and then later, AOL). The result was that the companies suddenly ended up in debt, and, in order to show a profit every quarter, had to forget about their standards and musical instincts. [Click for MORE] Sphere: Related Content

Tribune Co. to Reduce Severance Payouts

Bankruptcy judge approves cutting benefit roughly in half

A bankruptcy judge in Delaware Tuesday approved reduced severance terms for Tribune Co. employees who lose their jobs as the Chicago-based media conglomerate restructures to cope with shrinking ad revenue.

The policy essentially halves the payout to workers who are fired without cause. They will receive two weeks' pay for their first year of service and an additional week's pay for every subsequent year. Employees who left in 2008 received a week's pay for every six months on the job.

Tribune Co.'s largest paper, the Los Angeles Times, last week said it would eliminate 300 more jobs, and the company hasn't ruled out new cuts at other media holdings, including the Chicago Tribune.

Chandler Bigelow III, Tribune Co.'s senior vice president and chief financial officer, said in a Jan. 13 court filing that "it is prudent to consider further workforce reductions if current economic conditions persist."

Companies reorganizing typically seek court approval for major changes to compensation, including severance and incentives for executives.

-- Chicago Tribune

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Tribune Set to Name Ricketts Family as Cubs Buyer

Sam Zell and Tribune Co. are set to name the Ricketts family as the prospective buyer of the Chicago Cubs baseball team after a committee overseeing the company's bankruptcy court proceeding gave the proposed deal the green light, according to a person familiar with the matter.

The bid, led by Chicago financier Tom Ricketts, son of J. Joe Ricketts, the founder of TD Ameritrade Holding Corp., is valued at nearly $900 million, according to two people involved in the bidding process.

Mr. Ricketts's main selling point was offering 50% of the purchase price in cash, with the rest financed. The other offers included more debt. [Click for MORE]

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Tribune Co. Files With SEC So It Can Stop Filing With SEC

Tribune Co., which went private more than a year ago and filed for Chapter 11 bankruptcy protection six weeks ago, said Thursday that it filed a "Form 15" document with the Securities and Exchange Commission.

The filing will have the effect of "deregistering" the Chicago media company's debt securities and will release the company from its obligation to file such regulatory documents as the 10-K annual report and the 10-Q quarterly report. [Click for MORE]

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Tribune Co. Picks Favorite in Chicago Cubs Bidding

Tribune Co. executives have chosen a favorite among three bids for the Chicago Cubs and have given that recommendation to the unsecured creditors committee in the company's bankruptcy case, a source close to the situation said Wednesday.

Tribune Co. and its investment banker, JPMorgan Chase & Co., removed the names from the bids, referring to them by number. The committee will review the offers and other Tribune Co.-related business at a regularly scheduled meeting Thursday. [Click for MORE] Sphere: Related Content

Tribune Co. Building Its Case to Stay Intact

Corporate structure may need to be altered to reach workable plan

A month into its Chapter 11 bankruptcy case, Chicago-based Tribune Co. is beginning to form a strategy for holding the company's major assets together, not tearing them apart, sources close to the situation said.

But shaping up to be a central challenge is how to restructure the media conglomerate's $13 billion in debt while preserving its complex, tax-advantaged employee-ownership structure.

Though Tribune Co. executives remain in the early days of building a plan of reorganization, sources said Chairman Sam Zell's team is operating on the assumption that Tribune Co. assets like the Chicago Tribune, Los Angeles Times and WGN TV-9 are probably worth more held together than they would be chopped up and sold at distressed prices. An exception is the Chicago Cubs baseball team, which is in the late stages of being sold, with a winning bidder expected to be named as soon as this week.

Zell is also intent on preserving Tribune Co.'s S-Corp ESOP corporate structure, reasoning that its tax advantages will continue to have significant value if the company can emerge from bankruptcy protection as a going concern. [Click for MORE]

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Tribune to Pick Winning Bid for Cubs by Mid-Week

After a nearly two-year process, Sam Zell and Tribune Co. plan to name a winning bidder for the Chicago Cubs by the middle of the coming week, according to two people involved with the bidding.

Tribune, which last month filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code, has a board meeting scheduled for early in the coming week where executives handling the sale of the baseball franchise plan to review the competing bids and recommend a winning party.

The three finalists are the Ricketts family, founders of TD Ameritrade Holding Corp.; a group led by New York-based private-equity investors Marc Utay and Leo Hindery; and Chicago real-estate investor Hersh Klaff. [Click for MORE] Sphere: Related Content

Tribune Busy on Reorganization Plan

Solvency opinion was never revealed to public

The chief financial officer for the Tribune Co. said Friday that the media company is working on a business plan that will help it emerge from bankruptcy.

"We are facing very difficult cyclical and sector pressures in our key businesses," Chandler Bigelow III said at a hearing where he fielded questions from an attorney for the bankruptcy trustee and a handful of creditors.

Bigelow and Tribune attorneys were tightlipped when asked why a second of two solvency opinions issued in connection with a 2007 leveraged buyout was hidden from the public. [Click for MORE]

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Minneapolis Star Tribune Files Chapter 11

The bad news in the newspaper business continued to mount on Thursday as The Star Tribune of Minneapolis filed for bankruptcy protection.

Star Tribune management warned last month that it would seek bankruptcy protection if it did not win a series of labor concessions on wages and other matters by Friday. Talks with the major unions broke down last week and had not resumed.

The newspaper announced the filing on its Web site Thursday evening. [Click for MORE]

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Bankruptcy judge OKs Tribune Co.'s
short-term financing plan

Tribune Co. passed an early hurdle in its Chapter 11 bankruptcy case Thursday when a U.S. bankruptcy judge signed a motion authorizing the continuation of a short-term financing arrangement worth $300 million.

Judge Kevin Carey also granted the company more time to file schedules of its assets and liabilities and other financial statements.

The financing arrangement, supplied by Barclays Bank and secured by Tribune receivables, will last until April. At that point, Tribune will have to renegotiate with Barclays or seek financing elsewhere. [Click for MORE]

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Newspapers Move to Outsource Foreign Coverage

Tribune Could Close Dozens of Bureaus in Favor of Washington Post Deal; New York Daily News Signs Start-Up

From the Wall Street Journal:

Two major newspapers publishers are taking steps to outsource international coverage, as falling revenue is causing more U.S. papers to shrink their foreign and national footprint.

Tribune Co., which owns the Los Angeles Times and Chicago Tribune, is in talks with the Washington Post Co. about a deal to pay the Post for foreign and national coverage for Tribune's eight major dailies. Meantime, the New York Daily News has reached an agreement with a Boston-based start-up called GlobalPost to use the company's network of part-time foreign correspondents.

Together, the agreements could substantially overhaul the foreign news operations of three of the 10 largest U.S. newspapers. [Click for MORE]

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Live from Chicago... the Tribune News Room

Hat tip to Ed Padgett

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This News Just In From Chicago...

Bidding for Chicago Cubs may be near a conclusion
Tribune Co., owner of the Chicago Cubs, is close to selecting a winning bid for the team from three finalists, according to people familiar with the sales talks.

NYSE Officially De-lists Certain Tribune Co. Debt
The New York Stock Exchange followed up on its stop-trading order last month, officially notifying the Securities and Exchange Commission Tuesday that it has delisted some of Tribune Co.’s publicly traded debt.

Tribune default swaps may recover in 3.5 pct area
Sellers of protection on bankrupt Tribune Co's bonds are facing losses in the area of 96.5 percent of the insurance they sold, based on the initial results of an auction on Tuesday published by auction administrators Creditex and Markit.

OR

Tribune CDS recover 1.5 percent in auction
Sellers of protection on Tribune Co's bonds are facing losses of 98.5 percent of the insurance they sold, based on the results of an auction on Tuesday to determine the value of the bankrupt company's credit default swaps.The auction determined swaps on Tribune's bonds are worth 1.5 cents on the dollar, said auction administrators Creditex and Markit. Sphere: Related Content

Tribune Bankruptcy May Trigger Tax Complications

Of the many issues that surfaced after Tribune Co. filed for Chapter 11 protection yesterday, tax consequences were among the least discussed. But tax effects may be extremely cumbersome to deal with as the company works its way through bankruptcy, especially if Tribune loses its tax status as a so-called S corporation, says a new client advisory from Robert Willens LLC.

An S corporation — named so because it is subject to the tax code's subchapter S provision — meets the Internal Revenue definition of a small business, has fewer than 100 shareholders, and is structured as a corporation but taxed like a partnership. As a result, income and the attendant taxes pass through the corporation directly to the shareholders, who pay taxes on the profits. So, with the exception of "built-in gains," an S corporation is not subject to tax on its income.

Currently, all of Tribune's outstanding stock is owned by an Employee Stock Ownership Plan (ESOP), established when owner Sam Zell orchestrated the LBO. However, the number of shareholders may grow precipitously if the company is forced through a bankruptcy restructuring to pay-off its creditors in stock. That's a problem, notes tax expert Willens in his company's advisory. [Click for MORE]

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Tribune Seeks Permission to Fund Union Pensions

From the Chicago Tribune:

Chicago-based Tribune Co., the publisher of the Chicago Tribune, asked a judge for approval to pay pre-bankruptcy and future contributions to union pension plans.

In papers filed Wednesday in U.S. Bankruptcy Court in Wilmington, Del., the company, which filed for Chapter 11 protection Dec. 8, sought permission to make payments under collective-bargaining agreements.

"I believe that failure to timely pay the unpaid pension contributions would cause unrest and strain relationships with participating union employees and their unions at a time when their dedication and cooperation are most critical," Chandler Bigelow III, Tribune's chief financial officer, said in court papers.

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