Monday, December 8, 2008

Cubs' owner in bankruptcy

The storied Chicago baseball team is not part of the bankruptcy restructuring, but the Tribune Company which owns the ChiTrib, the LAT, WGN and numerous other radio and television properties is wallowed in $13 billion debt while it's worth only $7.6 billion on paper. To demonstrate how bad it's gotten for them: A 4.88% coupon bond expiring in August 2010 was trading on Friday for only $13.25 (par is $100) which indicates the level of distress and the market's lack of confidence in the company.

Not even the Saskatchewan Wheat Pool's bonds got that bad before it was forced to refinance, although it made some pretty stupid decisions after it demutualized.

The Trib was in trouble long before today's filing and the current downturn, but this is bound to make a lot of people stand up and take notice. When one media company after another folds like this, the people who end up on the street are trusted voices and scribes who people come to rely on for opinions and just information and local content. With major turnover, people lose whatever trust they have left in the media which isn't a lot to begin with.

Not that I wish bankruptcy on anyone, but some people are going to be quite happy when the next shoe to drop is Can West here in Canada. Slashing local news and public affairs shows as they did a couple of weeks ago just to prop up a perennially losing money paper (the National Post) is not a prudent business model.

UPDATE (Tuesday 8:38 am EST, 1338 GMT): For what it's worth, I pulled out my old business calculator, and figured out that in order to make good on that bond I mentioned above, Tribune would have to offer an interest rate of -- wait for it -- 1592.27%. Sounds like something Zimbabwe would offer on the market if anyone bothered to buy its bonds.

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