Florida newspapers at core of industry strife
Wake up and good morning. With plenty of implications for Florida, it's one more turn of the wringer this week for a troubled newspaper industry with reports the Tribune Co. is preparing for a possible filing for bankruptcy-court protection. The Tribune Co. owns 23 TV stations (and the Chicago Cubs) and 12 newspapers, including two of the eight largest in the country by circulation: the Los Angeles Times had weekday circulation of 739,000 and the Chicago Tribune had 542,000 as of Sept. 30.
The company also owns the South Florida Sun-Sentinel in Fort Lauderdale and the Orlando Sentinel.
Tribune Co. has been struggling under a $13-billion debt load incurred last December when real estate magnate Sam Zell took the company private in an $8.2-billion leveraged buyout. Today the company faces a deadline on $70-million of unsecured debt taken on by Tribune Co. before the deal.
Chicago-based Tribune has hired investment bank Lazard Ltd. as its financial adviser and law firm Sidley Austin to advise the company on a possible trip through Chapter 11 bankruptcy, say reports in the Wall Street Journal and New York Times.
For Florida newspaper readers, it's only the latest crisis brewing. Another newspaper company also burdened by debt and a steep slide in newspaper advertising, the McClatchy Co., wants to sell the Miami Herald, according to reports. The Herald is one of the largest of McClatchy’s 30 daily papers, with daily circulation of 210,000, and arguably its most prestigious, having won 19 Pulitzer prizes. The newspaper was once the largest in Florida but demographic changes and competition has forced it to shrink. (The St. Petersburg Times -- the newspaper I work for -- is Florida's largest newspaper now, and it, too, faces a challenging business environment. But it is privately owned and does not face the same stock price or debt pressures of many publicly-traded companies.)
Of course, the Miami Herald got a new owner just a few years ago when the once-great-now-defunct Knight-Ridder newspaper chain sold most of its papers to McClatchy for $4.5-billion in 2006.
Here's what all these newspaper companies share. They are publicly traded and investors are pessimistic about the industry's future, depressing company stocks. They have large debt loads -- the Tribune because buyer Zell borrowed heavily to buy the company in the first place, and similarly McClatchy borrowed to buy Knight-Ridder. They also face sharply dropping advertising revenue (most newspapers, public or not, face this same issue) because of the recession and some fundamental shifts in advertising strategies away from the printed page.
What does this all mean for Florida, which has suffered especially because of the sharp decline in housing (and real estate advertising)? Well, the Miami Herald could see a new owner of some kind. It's less clear the Orlando Sentinel or Fort Lauderdale's Sun-Sentinel will be sold but it's a distinct possibility if a Chapter 11 step by their parent company forces the sale of assets to raise money.
The owner of the struggling Tampa Tribune, Media General Inc. in Richmond, Va., saw its stock price close at a startling low $1.57 on Friday after trading above $27 per share in the past year.
The hardest-to-decipher question: Who's in the market for newspapers? With newspaper profits shrinking fast, the economy contracting and credit tight, many newspapers have been on the block for months without selling. Tribune Co. did manage to auction off its Long Island, N.Y., daily Newsday (bought by a cable TV business) to raise cash. But tighter credit markets are pushing sale prices lower.
Consider what's happening in the Denver market. William Dean Singleton, the chief owner of The Denver Post, said told the Denver Business Journal that Cincinnati's E.W. Scripps Co., the owner of the Rocky Mountain News, told his company last month it planned to close the money-losing News "as soon as practical." Singleton told the Journal he doubts a buyer will emerge for the 149-year-old daily, which was put up for sale Thursday.
-- Robert Trigaux, Times Business Columnist