The US newspaper crisis has just claimed its biggest victim to date. Tribune has filed for Chapter 11 bankruptcy protection a year after its $12bn leveraged buyout by property tycoon Sam Zell. Zell has a nose for appealing, but distressed, assets he is known as "the grave dancer" and hoped to forge "a new model for newspapers", said the FT. But Tribune was promptly hit by an accelerating advertising decline; even the election provided "only a brief fillip". That meant it was no longer able to cope with its excessive debt load.
Some of the biggest US metropolitan publications, like the Chicago Tribune and Los Angeles Times, are now under threat, as well as over 20 TV stations. The deal "always looked a stretch", said Lauren Silva Laughlin on Breakingviews. Now it's "a poster child for the excesses of the leveraged buyout craze". And "most of the risk is on the employees", said Jack Newman of CreditSight. Zell, who put in just $315m, financed much of the deal's debt by borrowing against his workforce's pension plan.
Meanwhile, the industry's third-quarter revenues are down nearly 18% year-on-year, and The New York Times itself "in discussions with lenders", reported the FT suggests the final three months will be worse. "Even the venerable Washington Post is suffering from the advertising market turmoil", said the Daily Mail's Simon Duke. Tribune seems unlikely to be the last bankruptcy in the sector.
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