The Baltimore Sun Dragged Into Bankruptcy With Tribune Chain

Posted on December 9, 2008

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One year ago this month, Sam Zell piled $8.2 billion in new debt on The Tribune Co. and took the newspaper chain private. That back-breaking debt has now forced Tribune to file for Chapter 11 bankruptcy protection.

Tribune owns eight major daily newspapers (including The Baltimore Sun and its suburban weeklies), 23 TV stations, WGN Radio, the Chicago Cubs baseball team and Wrigley Field. Oh, and some 50 Web sites.

Tribune is probably the biggest newspaper chain bankruptcy ever. But following on the housing bubble, the bailouts of major financial institutions, and the possible failure of the U.S. automobile industry if it doesn’t get government help, the demise of an over-leveraged newspaper company seems like, well, old news.

You mean daily newspapers are still publishing? Is anybody reading them?

It would be fun to blame Sam Zell for driving The Chicago Tribune and other legendary papers, like the LA Times and The Baltimore Sun, into the ground. But it would not be fair. Truth is, the incredible shrinking newspaper industry has been in ever-steepening structural decline for at least 20 years.

The industry was already staggering when Zell appeared on the scene, and he seemed to understand the urgency of the situation more clearly than the newpapers’ own executives.

The housing and financial crisis of 2008 magnified the newspaper industry’s troubles. Advertising revenues and circulations continued to fall, and more layoffs were inevitable. The Baltimore Sun shed another 100 jobs in August. I’ve lost count of the number of staffing reductions The Sun has been through since the early 1990s, when The Evening Sun was closed.

The Sun and other Tribune papers went under the knife for extensive redesigns last summer. The results of the redesign at The Sun are disheartening — less content, presented with headlines and layout that make your eyes bleed.

Under the circumstances, the outlook for Tribune’s eight major papers is better than might be expected. Their classified advertising for help wanted, real estate and used cars will never return to previous levels. Internet competition has taken care of that. Retail display advertising has been decimated by the demise of department stores. But surprisingly, all the dailies are said to be turning an operating profit. It’s the unbearable debt burden that forced the bankruptcy.

The bankruptcy reorganization will take pressure off the papers, and allow the corporation to restructure debt and renegotiate contracts. All the papers are expected to continue operating. They’ll never return to the plush profit margins previously expected in the industry, but perhaps stockholders will be willing to accept modest profits.

Meanwhile, Sam Zell will continue to sell off assets to reduce debts. He’s already sold Newsday,which had been Tribune’s presence in the New York City market. The company is still strong in its other major news markets, Chicago and Los Angeles. Sales of the Chicago Cubs and Wrigley Field are said to be pending.

I’m guessing that Sam Zell would be happy to part with The Baltimore Sun and its valuable Calvert Street and Port Covington real estate, if an attractive offer should materialize. We can hope that a local buyer will step forward to acquire and revitalize The Sun. — Bernie Hayden

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