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The Tribune Company filed for Chapter 11 bankruptcy (pdf, via Romenesko) Monday in order to restructure the $13 billion debt it's been burdened with since it went private a year ago. The company promised that it "will continue to operate its media businesses during the restructuring, including publishing its newspapers and running its television stations and interactive properties without interruption, and has sufficient cash to do so."
CEO Sam Zell said the company ran into a "perfect storm -- a precipitous decline in revenue and a tough economy coupled with a credit crisis that makes it extremely difficult to support our debt."
A few hours earlier, the New York Times, the Wall Street Journal, and Business Week all reported that the Tribune Company was taking a hard look at Chapter 11 and explained why. A big reason was an end-of-2008 deadline the company was facing to show that its debt from Zell's takeover was still no more than nine times gross revenues -- which have been skidding. Under Zell, the company has reluctantly sold one of its most profitable papers, Newsday, to raise cash, and it's been in a hurry to unload the Cubs and raise more.
The Cubs and Wrigley Field weren't included in the Chapter 11 filing, and the Cubs promptly released a statement saying, “The Chicago Cubs are not included in Tribune’s restructuring and the business and baseball operations of the Cubs continue independent of Tribune's decision to restructure its debt. The sales process for the team, ballpark and related assets continues and its timetable for completion remains unchanged by today’s announcement by Tribune. It is business as usual at Wrigley Field as the Cubs continue to prepare for the 2009 season. We remain exclusively focused on our singular goal of securing a World Championship for our fans and the city of Chicago.”
An unpleasant side to Chapter 11 is that a federal judge puts his or her nose into a company's business and all its financial troubles become much more public. For instance, Creative Loafing Inc., which owns the Reader, filed for Chapter 11 in September, and now CLI management and the company's principal creditor talk to each other in contentious bankruptcy court briefs. Then those briefs make their way into reporting on the case.