Tribune Co, the US newspaper-and-television company hurt by the slump in advertising and the economy, is in talks to reorganise its debt and may file for bankruptcy as soon as this week in what would be the biggest media failure for some time.

The news was reported by the Wall Street Journal.

The paper said the company had hired Lazard Ltd as financial adviser in preparation for a filing. It previously had talked about hiring financial advisers to avoid bankruptcy, but that would seem not to be an option any more.

The Tribune Co was bought by Chicago businessman, Sam Zell, using his money, borrowed funds and a financing technique that gave equity to employees, but no real power.

Total debt was put at around $US11.8 billion at the end of the September quarter. The company said “interest expense related to continuing operations increased to $US232 million in the 2008 third quarter from $1US75 million in the third quarter of 2007 primarily due to higher debt levels, partially offset by lower interest rates.”

So with revenues from ads and sales, and earnings crunching, it’s no wonder the company is close to collapse and needs a circuit breaker like the Chapter 11 process. Ie. bankruptcy.  

Its website describes the company as the “largest employee-owned media company in the US”:

Tribune is America’s largest employee-owned media company, operating businesses in publishing, interactive and broadcasting, including ten daily newspapers and commuter tabloids, 23 television stations, WGN America, WGN-AM and the Chicago Cubs baseball team.

It also owns the Los Angeles Times, which has been cutting staff. Earlier this year it sold the Newsday paper on Long Island to Cablevision, the New York-based cable TV company, for a reported $US650 million.

Chapter 11 will help the company cut its huge debt load, retrench staff and make other cost cuts, but it won’t help boost advertising revenues, or stop the drift to the internet. If Tribune Co does go into Chapter 11, it will be the biggest US media company to fail so far in this slump.

The company reported in its third quarter earnings statement in October “a third quarter 2008 loss from continuing operations of $US124 million compared with income from continuing operations of $US84 million in the third quarter of 2007.

“Tribune’s 2008 third quarter operating revenues decreased 10 percent, or $US122 million, to $1 billion. Consolidated cash operating expenses were up 6 percent, or $US57 million. Operating cash flow decreased 67 percent to $US90 million in the 2008 quarter from $US268 million in the 2007 quarter, while operating profit declined 83 percent to $US37 million from $US217 million.”

The news comes amid a blizzard of bad news for US newspapers. The media world is still talking about the decision of The New York Times to slash its dividend and Reuters is reporting that the McClatchy Co is trying to spruik its Miami Herald newspaper to possible buyers to raise cash and lower debt. The NYT reported on Saturday that McClatchy (which has already run two major staff and cost cutting campaigns through its papers in the past year) wants to sell the newspaper. The Times said no real buyers had emerged.

The Miami Herald has a daily circulation of 210,000 which is around the size of the Sydney Morning Herald and The Age. McClatchy bought papers from the break-up of the Knight Ridder media group a couple of years ago. Newspaper sales have fallen since, advertising has followed and the company is struggling to stay alive.

The Times said that in the first 10 months of this year, McClatchy’s ad revenue fell 14.7% in other parts of the country, but 22.5% in California and Florida. McClatchy’s major title before Knight Ridder was the Sacramento Bee in California. McClatchy’s share price, which exceeded $US75 in 2005, closed at $US2.20 on Friday: see there are worse examples around than Fairfax.