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December 7, 2008 9:06 PM

New York Times: Tribune Co. Taps Sidley Austin to Avoid Bankruptcy

Posted by Ed Shanahan

To the list of industries in serious trouble right now, add the newspaper business. It comes as no surprise, of course--we've been reading about print's demise for some time. Still, any major U.S. company moving one step closer to bankruptcy gives us pause, and that's the news this Sunday evening, via the New York Times. DealBook broke the story that Sam Zell's Tribune Co. has retained investment bank Lazard and law firm Sidley Austin in its attempts to avoid filing for bankruptcy, citing sources who were briefed on the matter.

The move comes just four weeks after the company--owner of the Los Angeles Times and the Chicago Tribune, among other media and sports properties--reported losses of $121 million in the third quarter. "We are operating in an exceptionally difficult financial and economic environment," chairman and CEO Sam Zell said in a statement releasing the numbers. "The newspaper industry continues to see extraordinary declines in ad revenues, and Tribune is no exception."

Zell took the company private in 2007, and assumed his role at Tribune last December; Sidley, along with a team from Wachtell, Lipton, Rosen & Katz, advised Tribune on the deal.

The debt Tribune has carried since the sale has been crippling, and, DealBook says, "has been compounded by the growing drought of advertising for newspapers...While Tribune must contend with hefty interest payments over the next year, its most pressing problem is a maintenance covenant on some of its debt that limits the company's borrowings to no more than nine times earnings before interest, depreciation and amortization."

Tribune's standing has grown only more dire in recent months, even as the company has sold off assets to ease its debt load--Long Island daily Newsday was sold to the Cablevision's Dolan family for $650 million in May, and a sale of the Chicago Cubs is imminent.

We reached out to Sidley bankruptcy and corporate reorganization practice co-heads James Conlan and Larry Nyhan for confirmation of the firm's role on the  matter. No word back yet. A later Times report says it's not clear how seriously Tribune is considering a bankruptcy filing.

For yet more distressing news about the ailing newspaper industry, we recommend Andrew Sullivan's column in Sunday's Times of London. In it, he cites circulation declines of about 2 percent a year over the last decade. The numbers have shrunk more dramatically in the last year alone, Sullivan reports--between March and September of this year the 500 biggest newspapers in America reported an average circulation decline of 4.6 percent.

"It is therefore a near-certainty that many towns and cities in America will no longer have a newspaper after the downturn," he writes. "And that may apply not just to small names but to some big ones as well. The Los Angeles Times, for example, has gone from a circulation of 1.1 million to 739,000 since the turn of the millennium. ... Landmark names...are increasingly on the chopping block. The Chicago Tribune has seen its weekday circulation collapse by 8 percent in the past year."

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