David Kirkpatrick

December 9, 2008

Tribune Co. files Chapter 11

I’ve blogged on the new troubles facing the newspaper industry (and post itself is on the ailing NYT) here, and left this bit of news out of the post — Tribune Co., publisher of the Chicago Tribune and the Los Angeles Times has filed for bankruptcy protection.

Blame this problem on Sam Zell being a real estate guy (read: asshole until proven otherwise) and not a media guy. He was buying assets and not intellect. That might be the key to old media’s malaise right there.

That problem can even be traced back to the failed AOL/Time Warner merger. Everyone wanted to get into assets and not intellect. Time Warner lost its way and AOL brought hot air to the table.

Zell bought what he thought was an asset to leverage, but the reality was he bought brands and smarts. Real estate investors getting into new fields almost always blow the deal and lose money. Just look at Virgin Entertainment right now and REIT Richard Branson sold out to. That whole process is a slow-moving train wreck.

Big names in trouble here: Tribune in Chapter 11 and the New York Times has mortgaged its building for cash. I’m a huge fan of business and no fan of regulation, but something is quite rotten in Denmark, so to speak.

You’ll get no argument from me that this financial crisis is the result of something being majorly broken in our system. My money’s on high finance being a delicately balanced house of cards that became too tall and too greedy. Something of a modern-day tower of Babel in numbers.

From the second link:

Tribune Co, which owns eight major daily newspapers and several television stations, filed for Chapter 11 bankruptcy protection after collapsing under a heavy debt load just a year after real estate mogul Sam Zell took it private.

Like other big U.S. newspapers, Tribune is under pressure from declining advertising revenue and circulation as more people get news online and as companies cut their marketing budgets because of the economy.

The Tribune Co‘s financial condition is symptomatic of the ills that plague the newspaper industry,” said Jerome Reisman, a bankruptcy attorney with Reisman, Pierez & Reisman.

Tribune’s bankruptcy filing is the latest chapter in the unraveling of the leveraged buyout boom which saw many companies bought by private equity firms and other investors ending up with massive debt loads.

Zell loaded up the privately held publisher with about $8 billion in additional debt when he took the company private in a transaction largely financed by company contributions to an employee stock option plan.