RIP: Tribune Corp

In the fine tradition of catching up on posts, including Andy Dickinson’s recently, I’m getting back to blogging after a busy week last week that included following the Virginia Tech story, a full schedule of speaking and more work on my paper for XTech.

Tribune Co: Who does their numbers?

As I’ve often said, I grew up 90 miles west of Chicago and I have friends and former colleagues who work (or probably worked, past tense, at this stage) at the Chicago Tribune. I’ve never been a huge fan of the Trib because, in my opinion, they have never really covered the City very well and instead catered to the conservative suburbs. But it’s been sad to watch such a great newspaper lose its way. Now it would seem that the people running the show have lost their minds, or at least their sense of fiscal prudence. The Trib, like so many other newspaper groups (see Knight-Ridder), has been trying to figure a way to sell itself for a while now, but the deal it finally settled on is so insane that it makes the maniacs who fueled the recently bust housing bubble look like a paragon of financial prudence. You don’t bet the farm on what amounts to a gamble that everything will go well, in fact not only well, but better than it’s going right now.

Alan Mutter does the colour by numbers, and the primary colour is red:

To fund the planned buyout, Tribune Co. will raise its debt load by 167% to a formidable $13.4 billion from the present $5 billion, according to analyst Alexia Quadrani of Bear Stearns. The new debt, which will be 9.2 times the company’s operating earnings, will make Tribune the second most leveraged of the 20 largest public media companies, as illustrated in the graph below.

Alan not only lays out the grim terms, but he also puts this in context of other newspaper companies and other media groups. It’s a good post, and as things get tight in the UK market, it’s a good object lesson in how not to survive.

Mark Potts said the Trib is living on a ‘razor’s edge’. The company will be able to pay down its massive debt if, and it’s a big if, they can just keep their cash flow at 2006 levels, $1.4 billion.

There are some real red flags in this story. Not only is revenue declining, but cash flow “fell much more precipitously,” because high-profit-margin pieces of the business such as real estate and auto classifieds are being particularly hard hit. Uh-oh. “Analysts said there was no evidence the company has hit bottom.” Yikes.

It’s sad to see, but I wish the company, and more importantly, its employees, good luck.