Thursday, April 17, 2008

Zell: Eroding Tribune Co. Revenue May Force Sell-Off Of Newspapers

By Mark Fitzgerald


Published: April 17, 2008 2:55 PM ET

CHICAGO Tribune Co. revenue is down significantly so far this year, and may force the Chicago media giant to sell off newspapers and other properties, Chairman and CEO Sam Zell said in a conference call Thursday afternoon.

"When we got into this, our goal was to keep everything together, and to preserve the ownership of all the assets," Zell said. "The significant erosions of the first quarter has certainly put that plan into some question, and we are forced to consider the divestiture of some of our assets."

A Tribune spokesman said operating results for the first quarter are still being compiled, and would be released in mid-May when they are filed with the Securities and Exchange Commission.

But Zell said the preliminary results show "double-digit declines in print" for the quarter, largely on big dips in classified ad revenue. Real estate and recruitment classified are down "significantly" ahead of other ad categories, he added.

Classified is about one-third of total print ad revenue, and was responsible for nearly three-quarter of the decline in revenue during 2007, CFO Chandler Bigelow said.

Zell said broadcasting results are running ahead of 2007 results, and ahead of the company's projections for the year.

Zell also said talks to sell Wrigley Field, home of the Chicago Cubs baseball club, are "making progress." Tribune wants to sell the ballpark separately to an Illinois public agency. Zell said offers books to sell the team will be sent out in 10 days.

Mark Fitzgerald ( is E&P's editor-at-large.

Newsday Publisher Says Zell Conference Call 'Creates Uncertainty'

by John Koblin | April 17, 2008

Since Sam Zell acknowledged for the first time today that there are outside parties asking about Newsday, the paper's publisher, Tim Knight, was forced to acknowledge it as well. He has just sent a memo out to his staff, explaining that he knows "this creates uncertainty." The memo is revealing since it seems to show that Mr. Knight knows as much as we know: not much.

Dear fellow Newsday employee,

Sam Zell hosted a conference call with Tribune lenders today. In the course of taking questions, he acknowledged that he has received inquiries about Newsday.

As we all know, Newsday does an excellent job of serving a very desirable marketplace of people who are highly valued by advertisers. It is not surprising that the possibility of acquiring Newsday would generate a lot of interest. Whether anything will ultimately happen as a result of these expressions of interest is not known at this time.

I know this creates uncertainty; however, the people of Long Island are depending on us to stay focused on delivering them local, unique and useful news and information, such as our important investigative coverage of LI school districts' pension scandal.

If and when there is something tangible to report, I will let you know.

Tribune may sell more assets but expects to meet short-term obligations

Given the deepening financial downturn in the newspaper sector, there has been speculation of late that the heavily leveraged Tribune might encounter difficulty making good on the hundreds of millions of dollars in debt obligations that are scheduled to come due late in 2008.

But Zell, when asked directly about Tribune's liquidity, responded by saying he expects the company to be able to meet its payments.

In response to a question about the status of Tribune's Newsday newspaper, Zell said only that "when we originally entered into (the buyout) our goal was to keep everything together," but the subsequent erosion in revenue "has certainly put that plan into question," and obliged Zell's management team to consider a number of potential divestitures in addition to the cost-cutting and revenue-enhancement measures they have put in place to date.

Thursday's conference call was designed, officials said, to discuss progress at the company" since the going-private transaction and to provide an update on trends in early 2008.

From the start, Zell has envisioned selling Tribune's Chicago Cubs baseball team and using the proceeds to pay down some of the LBO-related debt. But the sale plan has moved more slowly than expected, in part because of Zell's desire to sell the team separately from Wrigley Field, where the Cubs play.

On Thursday, he signaled that the process is regaining its momentum: the company now intends to issue offering documents to potential buyers under two formats -- with the stadium and without.

Zell also told the creditors that he and his management team have made "considerable strides" in altering the culture at Tribune, which he has characterized as conservative and overly bureaucratic.

"We've raised the bar against which success will be measured," Zell said. Tribune officials described experiments under way at the media chain's smaller newspapers, including more performance-oriented compensation packages for sales people and a heightened focus on local news.

Those efforts, said Dave Novosel, of the credit-analysis firm Gimme Credit, promise to be "helpful, but certainly not transformational."

"Overall, we didn't hear anything to change our negative view of Tribune" debt as an investment, Novosel said.

Tribune expects to pay a $650 million debt obligation that comes due Dec. 4. In addition, about $250 million in medium-term notes come due in 2008, and Tribune intends to satisfy those obligations by drawing down a line of credit established under what is known as a "delayed draw facility." That money will be available, the company said, because officials don't expect they will need to tap into it to fund working-capital requirements.

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