Choking softly on the wad of debt “rescuer” Sam Zell fed it, Tribune Co checked into a Wilmington, Delaware, bankruptcy court at the end of 2008. Now newly slimmed, especially after the payment of $410 million in legal and other professional fees, the much diminished patient is about to be released and turned over to its new owners, a group of banks and hedge funds. How diminished? At the time Zell acquired control in 2007, Tribune Co’s newspapers, television stations, other media properties and Chicago Cubs baseball franchise were valued at $8.2 billion. Reporting from court filings, Chicago Tribune reporter Michael Oneal put Tribune Co’s current value at about $4.5 billion.
That’s not a haircut. That’s a beheading. Some of that loss in value represents the sale (for $845 million) of Tribune’s Chicago Cubs operation in 2009, but still.
What will the likely new owners (JPMorgan Chase; Angelo, Gordon & Co.; and Oaktree Capital Management) do with the reconstituted Tribune Co? According to Oneal, who has been monitoring the ailing company’s vitals since before its bankruptcy, Tribune isn’t so sick that it must sell off all its parts immediately. But hedge funds and banks aren’t the best managers of media properties, and when combined with today’s declining market for media properties, those hedge funds and banks might want to put out a for-sale sign as soon as possible. I’m sure that if you were interested in Tribune’s 23 TV stations, which are valued at $2.9 billion, they’d meet you for coffee.
But Tribune’s eight remaining dailies – the Los Angeles Times, Chicago Tribune, Baltimore Sun, Hartford Courant, Orlando Sentinel, Ft. Lauderdale Sun Sentinel, Allentown Morning Call, and Hampton Roads Daily Press – are another story. Given the collapse of newspaper properties, the hedgies and bankers might be willing to bring Irish coffee, pastries, and the pink slips for the papers to your home in hopes of doing a quickie deal. Evidence is mounting that newspaper properties – with the exception of the national dailies and some small-town franchises – now have expiration dates stamped on their sides. Every moment the new owners don’t sell the Los Angeles Times and the Chicago Tribune is a moment that the newspapers decline in value. If some of these newspapers don’t sell in the next five years, there might not be anything left for the owners to sell.
Oneal provides a couple of data points that illustrate the decaying value of Tribune’s newspapers. In December 2006, prior to Sam Zell’s takeover, David Geffen made a reported $2 billion cash offer for the Los Angeles Times alone, but company adviser Lazard Freres & Co recently valued the Tribune newspaper portfolio at about $623 million. That’s $27 million less than what Tribune got for Newsday when it sold the paper to Cablevision in 2008. (Cablevision took a write-down for half of that price in 2009.)