Zell Memo on Tribune Bankruptcy: ‘Perfect Storm’ Crippled Company
CEO: Precipitous decline in revenue, touch economy, credit crisis to blame.
Nearly a year after real estate mogul Sam Zell took the Tribune Company private in a dramatic $8.2 billion buyout, the troubled company—which owns the Chicago Tribune, Los Angeles Times and Chicago Cubs baseball franchise, among other properties—has filed for bankruptcy protection. (The Cubs franchise is not part of the filing, the company said.)
Zell said a “perfect storm” of economic factors led the Chicago-based company to file for bankruptcy.
“A precipitous decline in revenue and a tough economy have coupled with a credit crisis, making it extremely difficult to support our debt,” Zell wrote in a memo to staffers. “All of our major advertising categories have been dramatically impacted.”
Here’s Zell’s memo in full:
We just announced that Tribune is restructuring its debt under Chapter 11 protection. I’m sure you saw the speculative coverage last night and this morning. I would have preferred everyone get the news from me first, but since our debt is publicly traded, we had to keep this decision confidential until we had a formal board decision. The Cubs franchise is not part of the filing.
Most importantly, I want to stress that we will continue to operate our business as usual. That includes meeting payroll and covering benefits (such as healthcare, disability and others), and paying vendors for all goods and services they provide to us going forward.
As is routine with Chapter 11 filings, we have filed "First-Day Motions" to get court approval on these and many other programs that are essential to continuing our businesses without disruption. We expect to get approval on these motions within the next few days.
You are also most likely wondering about the other aspects of your compensation. The 401(k) is unaffected by the filing, and in general, the existing benefits in the pension and cash balance plans are also unaffected by the filing. The ESOP is part of the ownership structure, so its value and role long-term will be determined in the restructuring. We believe the structure is a valuable asset to the company and that there are strong reasons to preserve it.
So, how did we get here? It has been, to say the least, the perfect storm. A precipitous decline in revenue and a tough economy have coupled with a credit crisis, making it extremely difficult to support our debt. All of our major advertising categories have been dramatically impacted.
By restructuring our debt, we will reduce the pressure on the company’s operating businesses, enabling us to pursue our vision of creating a sustainable, cutting-edge media company that is valued by our readers, viewers, and advertisers, and that plays a vital role in the communities we serve.
This filing should not impact the way you do your jobs on a day-to-day basis. We will continue to operate responsibly in a challenging environment — aggressively managing costs and maximizing revenue opportunities. These are all things we would do whether or not we were restructuring our debt.
Our challenges are consistent with those facing all media companies, and an increasing number of companies across a variety of industries today. The reality is that we — along with the rest of the country — have very little visibility on where the economy is headed and how our businesses will perform given the recession.
The good news is that we have great brands, and we produce great products every day. It’s up to all of us to continue to focus on what it is we do best.
As your Chairman and CEO, I will continue to be actively engaged in the business and I remain committed to the company, to you and to our lenders. Randy, Gerry and the rest of the management team are equally dedicated to moving this company forward.
I’m sure you have a lot of questions that this email doesn’t cover. I encourage you to visit TribLink where we’ve posted some anticipated Q&A, or call the toll-free number we’ve established — 888-287-7568. We’ll also have information posted on Tribune.com. But, recognize that there is quite a bit we don’t know — or that we cannot confirm — at this point.
I am proud of the work we have done at Tribune in the last year. I’ve seen strong determination to take hold of this company and put it on a new course. As a result, we’ve reduced costs, gained market share, and laid the groundwork for creating a new business model out of traditional media. This restructuring will give us the time we need to build that model, to secure sustainable and growing cash flow, and to achieve the success the talented partners in this company deserve.