Excerpt: Tribune Files for Bankruptcy

• “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,” Mr. Zell, who holds the titles of Tribune chairman and chief executive, said in a statement. “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.”
• In a court filing, 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. Zell acquired the company — a deal he struck using mostly borrowed money. All of the now privately held company’s equity is owned by an employee stock-ownership plan, which is likely to get wiped out.
• Tribune said in a statement that it has enough cash to keep operating as usual. Barclays, one of its existing lenders, agreed to amend an existing $300 million financing facility, as well as to provide a $50 million letter of credit. The latter is part of an overall debtor-in-possession financing package, which is usually extended to companies that file for bankruptcy.
• A CreditSights analyst, Jake Newman, wrote in a research report published last month that Tribune avoided technical default in the third quarter partially through some accounting adjustments.
• Tribune’s problems have long been reflected in the price of its bonds. Tribune bonds maturing Aug. 15, 2010 with a 4.88 percent coupon traded at $13.25 on Friday, suggesting severe levels of distress.

Source: New York Times