More than four years after crushing debt and plunging advertising sales forced it to file for Chapter 11 bankruptcy protection, Tribune Co. has emerged with a new television-focused board and over $1 billion in new financing.
Led by such creative and technology heavyweights as Ross Levinsohn, the former interim CEO of Yahoo Inc., and Peter Murphy, former strategic officer of The Walt Disney Co., the board's roster suggests a focus on the company's TV assets rather than newspapers, which haven't managed to turn around declines in readership and advertising. Peter Liguori, a former TV executive at Discovery Communications Inc. and News Corp.'s Fox, is expected to be named CEO in the next several weeks.
The exit closes a dark period for Tribune, which was founded in 1847 with a hand-cranked print run of 400 copies of the Chicago Tribune. It founded the WGN broadcasting brand with a radio station in 1924 and a TV station in 1948. The call letters stood for "World's Greatest Newspaper." Tribune first went public in 1983 valued at $206 million — one of the biggest IPOs of its day — and expanded over the years into a media giant through acquisitions of TV stations such as KTLA in Los Angeles and newspapers such as the Los Angeles Times, The Baltimore Sun and Newsday. It also owns a stake in the Food Network and online job site CareerBuilder.com.
In 2006, pressured by its long-sagging stock price and dissident shareholders, Tribune put itself on the block. Sam Zell, a Chicago real estate mogul who made his fortune in commercial real estate but had little experience with the media industry, took the company private in a leveraged buyout that valued Tribune at about $8.2 billion.
But the deal ballooned Tribune's debt load from $5 billion to more than $13 billion just as the Great Recession hit. Advertising revenue plummeted across the industry, which was also struggling with steep declines in circulation as readers found free access to news, sports and entertainment online. Less than a year after Zell closed the deal, Tribune filed for Chapter 11 protection.
The company's restructuring dragged on for years due to fraud allegations and dueling lawsuits between creditors. In the end, the parties agreed to a plan that included payouts of nearly $3 billion in cash to creditors and turned ownership over to senior lenders including Oaktree Capital Management, Angelo Gordon and Co., and JPMorgan Chase and Co.
The emerging Tribune is estimated to be worth about $4.5 billion, with television assets generating most of its value. Newspapers — seen as accounting for less than 15 percent of its value today — are expected to be sold off in a process that will likely see several bidders.
"Tribune is the poster child for the demise of the metropolitan newspaper," said Ken Doctor, a newspaper industry analyst with Outsell Inc. "Tribune remains a media company but likely drops the part of media that gave it its name and its birth, which is its newspapers."
Doctor says he expects that the Los Angeles Times and Chicago Tribune could be sold for around $600 million to $700 million. Interested bidders include News Corp.'s Rupert Murdoch, Freedom Communications owner Aaron Kusher, who bought the Orange County Register this summer, and Carlos Slim, the Mexican billionaire who invested in The New York Times Co., Doctor said.
As part of the restructuring, Tribune closed on a new $1.1 billion senior secured term loan and a $300 million revolving credit line. The loan will fund payments required under the reorganization plan, and the credit line will pay for its ongoing operations.
CEO Eddy Hartenstein said Monday that Tribune "emerges from the bankruptcy process as a multimedia company with a great mix of profitable assets, strong brands in major markets and a much-improved capital structure." He noted that the company's restructuring ensures that Tribune's subsidiary creditors and vendors receive payment "in full-100 percent recovery of what they are owed."
Hartenstein will remain at the helm for the next several weeks until the new board meets to designate executive officers.