Tribune prepares for possible bankruptcy filing: WSJ

Highlights from the WSJ Article:

- the newspaper-and-television concern 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, people familiar with the matter say.

- Tribune owns eight major daily newspapers, including the Los Angeles Times, Chicago Tribune and Baltimore Sun, plus a string of local TV stations. (Wikipedia profile

- Tribune has been on wobbly footing since last December, when real-estate mogul Samuel Zell led a debt-backed deal to take the company private. Tribune has stayed ahead of its $12 billion in borrowings with the help of asset sales. Now, however, shrinking profits are tightening the noose.

- The company's cash flow may not be enough to cover nearly $1 billion in interest payments due this year, and Tribune owes a $512 million debt payment in June.

- The company is likely to be in violation of debt terms that limit borrowings at the end of the year to nine times its adjusted profits. The ratio stood at 8.3 at the end of the second quarter, before Tribune reported an 83% decline in operating profit for the three months ended Sept 28.

- Violations of such debt covenants have become commonplace for newspaper companies as their profits have ebbed. Lenders so far have been willing to give the companies a pass in exchange for higher interest rates and other concessions, but Tribune has little wiggle room. Terms of the company's debt already are so loose and its financial standing so unsteady that a covenant waiver may not help.