The Tribune Company Free Falls Into Bankruptcy

12/9/08 UpdateWell, unlike Lehman, the more traditional complement of first day motions were filed late last night (docket here), including a critical vendor motion and a financing motion that authorizes it to continue selling its receivables through an amended securitization facility.  Here's the 90 page supporting affidavit of Chandler Bigelow III, the Trib's CFO, in support of all the first day motions, including a brief explanation of the liquidity events that forced the entire enterprise into chapter 11 and a nice chart at the back showing the corporate relationship among the various filing and non-filing subsidiaries.

          *                                  *                             *

I followed Lehman's free fall into bankruptcy through a number of posts in the first week of Lehman's case (start here).  Today, the Tribune Company performed its own spectacular free fall into chapter 11, taking not only itself down, but also another 111 subsidiaries (including The Chicago Tribune, WGN, The LA Times, KTLA. The Times Mirror, The Baltimore Sun, WPIX, and even forsalebyowner.com).

Like the Lehman chapter 11 filing, the Trib's filing was accompanied by none of the motions one would expect to see at the outset of the case (such as for approval of use of cash collateral and a DIP lending facility, payment of basic employee benefits for accrued and unpaid wages, maintenance of its cash management system and business forms, and assumption of various customer programs, all accompanied by an affidavit of a senior executive explaining the cause of the filing and the need for the requested relief).

My guess is that the senior secured lenders, led by JP Morgan Chase, as agent for a host of banks and hedge funds in an $8.571 billion senior credit facility (compared with stated total assets of $7.6 billion), are balking at management's business plan for the near- and long-term, and have been unable to reach agreement with management over the terms by which the Trib and its subsidiaries would have access to cash to fund operations during the case.  Given the widespread recognition that DIP lending facilities simply have dried up, this standoff comes as no surprise.  Until then, the Trib's operations will run on fumes supplied by the goodwill of its trade vendors and employees.

Here's the Tribune Company's voluntary petition, and here's the docket in the Trib's main case, which as of 5:30pm EST has a single entry, that of the petition.  Though the other 111 or so subsidiaries identified in the Trib's petition are listed as co-debtors, none of these entities have yet filed their respective individual petitions, thus potentially enabling three wily creditors of each subsidiary to really throw a wrench in the works by filing an involuntary petition against that subsidiary in a venue other than Delaware (where the parent Tribune Company filed its petition).

Most people in Chicago were appalled by last summer's dramatic changes to the layout of The Chicago Tribune.  I wonder what's going to show up tomorrow. 

© Steve Jakubowski 2008