Sam Zell hosted a state-of-the-company conference call today, but get the backstory first: the New York Times has an engaging piece that's fortunately almost all about the business end of the Tribune Company. It doesn't look encouraging: "Its debt service bill this year is almost $1 billion, not including a $650 million balloon payment from the takeover financing that is due in December, and one for $750 million due in mid-2009."
In short: Zell only put up $315 million, or about 4%, of the original $8.2 billion purchase. In order to shrug off the demands of stockholders, he had to go into an immense amount of debt to a much smaller group, one that is presumably less patient about getting paid.
The company's worse-than-expected performance, particularly in the print business, has made it harder for him to meet his debt obligations, which is why he's scrambling to unload the Cubs--which isn't working, thanks to pushback from local media and government--and enforcing substantial cutbacks. It's also been suggested that the company's 31% stake in the Food Network would follow. Also: no more Soul Train music awards.
The culprit: classifieds; ironically, real estate classifieds are killing the company. Doesn't Sam Zell own all the real estate? Where does he advertise, anyway?
More subtly discouraging: The brass is starting to say weird things. Zell, today: "It's certainly a very changed environment. Employees are starting to take initiative, something that never happened before." Unclear how they managed for the decades previous. Randy Michaels, also today: "Sam is the smartest man I've ever met, but he can't solve the revenue problem. I can't solve the revenue problem. The only people who can solve the revenue problem are the people out there on the streets who can decide whether to make another call at 4 o'clock or not." Fortunately, they do seem to be enjoying themselves.
The other fallback plan is to beef up the broadcast wing; to that end Zell's pulling in all the Clear Channel people he can find. The WSJ has the full scoop. As the year progresses, expect this to get more interesting.