[Milhous]

The best headline so far on this latest sorry chapter of TRB's ongoing saga. Worker bees need to get their retirement money OUT of TRB before the whole house of cards falls. In the source story quoted by E&P Oneal says the cuts may come as early as Monday.

...These sources didn't know how many jobs are targeted companywide but said the Chicago Tribune Co. is expected to issue a request for buyouts on Monday, with a goal of eliminating 100 positions. If the offers don't generate enough savings, one source said, the company may resort to layoffs. ...

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Living on the Razor's Edge

As we're currently seeing in the housing market, if you borrow a lot of money through an exotic loan, and the value of your house starts falling or you run into trouble making payments, you can be in a world of trouble. That's why mortgage foreclosures are skyrocketing.

Well, the same principle applies to the newspaper business. As the Sam Zells of the world make highly leveraged purchases of newspaper companies, counting on the cash flow of the business to keep making payments over time on their enormous loans, they're taking the same sort of risk—on a much greater scale. As long as the cash flow keeps coming in, they're OK. They're living on the edge, but they're OK. But if cash flow drops below projected levels, they've got problems.

Which is why the latest results from Tribune Co. ought to make Zell and his bankers—and close watchers of the newspaper business—lose sleep at night. There are some real red flags in this story. Not only is revenue declining, but cash flow "fell much more precipitously," because high-profit-margin pieces of the business such as real estate and auto classifieds are being particularly hard hit. Uh-oh. "Analysts said there was no evidence the company has hit bottom." Yikes.

And then there's this:

[Zell] and Tribune Chief Executive Dennis FitzSimons have said the company will be able to pay down its heavy debt load if it can simply maintain last year's cash-flow level of $1.4 billion.

That's the razor's edge Zell is living on—and there already are indications that the cash flow is declining.

Zell is a smart man, and his bankers are no dummies. No doubt they've looked carefully at projections that indicate that there will be sufficient cash flow to pay off the debt load and keep Tribune Co.'s loan payments coming. But it's not good that there already may be issues with the company's cash flow.

And remember, this is all happening in a healthy economy. If we get a recession—which many economists predict—newspaper advertising will be hard hit, and so will the cash flow of Tribune Co. and the other highly leveraged newspaper companies in Minneapolis, Philadelphia and elsewhere. If you think the newspaper industry's in shaky shape now, just imagine what a recession would do to it. It won't be pretty.

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Yikes!

[abb]

It won't be pretty.

A minor but important correction here. The prospect of death and dying IS pretty to some...

[Chuck Dent]

Zell is a smart man, and his bankers are no dummies.

Zell is an old-time financial engineer. He and his investors are merely deploying 80s technology in that they can model cash flow to their heart's content, and parrot conventional wisdom about the 'Net, but in truth they really don't GET IT.

If they GOT IT, they would know that the newspaper industry, no matter what's its political orientation, local market strength, current economic health, etc. is absolutely doomed.

Google/Craigslist, et al, are, in reality, merely at the Model T stage/Ford Tri-motor stage. These companies and others are advancing data/display technologies that are going to push us to a whole new level.

The hardcopy news industry is so out of it that they don't even know it.

[bert]

......But if cash flow drops below projected levels, they’ve got problems.......

Bankers are very cautious folks but they like to go for rides. Zell is taking them on a ride.

Unlike the realestate benkers ride, the newspapers don’t have hard collateral to sell when it’s over.

[Cringing Negativism Network]

The best headline so far on this latest sorry chapter of TRB’s ongoing saga. Worker bees need to get their retirement money OUT of TRB before the whole house of cards falls. In the source story quoted by E&P Oneal says the cuts may come as early as Monday.

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Enron. But run by leftists, and staffed by leftists?

At least Enron, did something useful for a while.

[Grampa Dave]

I get goose bumps when I read articles like this where business realities have a head on collision with the drugged out fantasies of those in charge of the MSM.

[PGalt]

Thanks for the ping. Great news. Great FReeper comments.