By Mark Fitzgerald
Editor And Publisher
Published: May 12, 2008 12:45 PM ET
CHICAGO Tribune Co.'s $650 million sale of Newsday Monday gives the Chicago media giant some breathing room on its $12.8 billion in debt -- but not much more.
Thanks largely to the $8.2 billion in debt it took on to go private in the deal engineered by real estate mogul Sam Zell, Tribune faces a debt service bill of $1 billion this year. And that doesn't include a $650 million payment due in December.
"Does it help Tribune? Yes. Is it the last asset sale? No," said David Novosel, a Chicago-based analyst for Gimme Credit, an independent research firm on corporate bonds. "So while its good news from Tribune's perspective, it certainly doesn't solve all their problems."
Novosel said he was pleasantly surprised by the price, which was $50 million more than he expected. But in a telephone interview, he repeated a theme he has sounded in notes to investors: Tribune debt is at distressed levels, and continuing assets sales are a must.
"I would say it is not on the verge of bankruptcy," Novosel said, "because I think the assets sales will get them over the hump near-term. Can I see them going on the verge in mid-2009? I would say yes."
Another balloon payment from the going-private debt comes due in mid-2009.
This is the biggest asset sell-off so far for Tribune Chairman and CEO Zell, who at first vowed not to shed any properties except the Chicago Cubs Major League Baseball team and its Wrigley Field home.
Tribune earlier this year sold a studio production lot in Hollywood for $121 million.
It is also apparently accelerating what had been a slow pace in selling the Cubs. The team, the stadium and naming rights could bring as much as $1 billion.
In the $650 million Newsday deal, which is fashioned as a joint venture to defer capital gains taxes, Tribune will receive $612 million in cash plus $18 million in rent prepayments on certain property leases. Its continuing 3% equity stake in Newsday is valued at $20 million.
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