Tribune Co. puts arduous bankruptcy behind it
LOS ANGELES TIMESFirst published Dec 31 2012 08:42AM
The new year represents a long-awaited new start for the Tribune Co.
The newspaper and television conglomerate emerged from bankruptcy Monday, a financially stronger version of the company that sought court protection four years ago but one that still must grapple with the challenges bedeviling traditional media in the digital age.
The exit from bankruptcy is a milestone for the parent of the Los Angeles Times.
The company sought Bankruptcy Court protection in December 2008 after an $8.2 billion leveraged buyout by real estate magnate Sam Zell saddled the company with $12.9 billion in total debt just as advertising revenue was collapsing.
The bankruptcy became one of the longest in U.S. corporate history, in part because of fierce infighting among the investment firms that assumed ownership of Tribune after acquiring its debt.
The slimmed-down Tribune, which is a partner in McClatchy-Tribune News Service, worked hard in the past four years to refocus itself as a faster-paced digital enterprise. The company emerged from bankruptcy with significantly less debt - $1.1 billion plus a $300 million line of credit. It also has a new board of directors composed largely of entertainment-industry veterans.
But the media conglomerate will still be buffeted by the larger forces pounding the newspaper industry, specifically uncertainty over whether papers can generate sufficient revenue from digital operations.
"Tribune is far stronger than it was when we began the Chapter 11 process four years ago and, given the budget planning we’ve done, the company is well-positioned for success in 2013," Eddy Hartenstein, Tribune’s chief executive, wrote in a note to employees Sunday night.
Tribune’s new board of directors is made up of a who’s who of Hollywood players. Most have no hands-on experience running newspapers and television stations, which are Tribune’s biggest assets.
Five of the seven members have ties to the entertainment and media industries, including Hartenstein and Peter Liguori, a former News Corp. executive who is expected to succeed Hartenstein as Tribune CEO in the next few weeks.
Also named to the board are Peter Murphy, previously a longtime executive at Walt Disney Co.; Ross Levinsohn, former head of global media at Yahoo Inc.; and Craig A. Jacobson, a veteran entertainment attorney.
The board will be rounded out by Bruce Karsh, president of Oaktree Capital Management, the Los Angeles investment firm that owns about 23 percent of the new Tribune; and Kenneth Liang, an Oaktree managing director.
Tribune owns 23 local television stations, eight daily newspapers and Internet and other media properties.
Those holdings include the Chicago Tribune and national cable station WGN-TV. Tribune also holds slightly less than one-third of the Food Network cable channel and about a 25 percent stake in the CareerBuilder website.
Liguori is also a former Discovery Communications senior executive whose resume is in programming and marketing. He headed both the FX cable network and Fox Broadcasting at News Corp. At Discovery, he served as chief operating officer of the cable programming giant.
Murphy spent almost two decades at Disney, rising to the position of chief strategist. He founded private investment firm Wentworth Capital Management. He has close ties to Angelo Gordon & Co., an investment firm that will own roughly 9 percent of the new Tribune Co.
Levinsohn is a former head of global media at Yahoo. He also served briefly as its interim CEO before Google Inc.’s Marissa Mayer was tapped for that job. Levinsohn also is a former News Corp. executive who headed its interactive unit.
Jacobson, an attorney at Hansen, Jacobson, Teller, Hoberman, Newman, Warren, Richman, Rush & Kaller, is one of Hollywood’s more prominent deal-makers. His clients have included several high-profile executives and performers such as Ryan Seacrest.
Despite the financial travails of the newspaper industry, Tribune remained profitable throughout the bankruptcy. It built cash reserves of more than $2.5 billion as of Nov. 18, according to a U.S. Bankruptcy Court filing this month.
Creditors are expected to immediately take nearly $3 billion in cash out of the new company, some of it coming from a new $1.1 billion loan that was approved as part of the bankruptcy.
The value of Tribune’s newspaper properties has sunk to $623 million, a fraction of their value a few years earlier, according to an estimate filed in Bankruptcy Court in April.
A key question still to be answered is what Tribune will do with its newspapers. Some analysts believe the company will seek to sell the slower-growing newspapers to focus on TV holdings.
As for the Los Angeles Times, Rupert Murdoch’s News Corp. has expressed interest, according to people familiar with the matter.
Aaron Kushner, owner of the Orange County Register, and Doug Manchester, the San Diego real estate developer who last year bought the local Union Tribune newspaper, also have shown interest.
Austin Beutner, the former venture capitalist and former deputy mayor of Los Angeles, told The Times in October that he has reached out to civic-minded investors who would consider acquiring the paper.