Zell says ad sales not improving
Tribune Co. Chief Executive Officer Sam Zell, the billionaire who took the media company private last year, said newspaper advertising sales haven't improved in the second half of 2008.
"In the first half of the year, the newspaper industry has seen publishing advertising revenues decline around 15 percent, and I can tell you it hasn't gotten any better in July or August," Zell said on a conference call with lenders today.
Tribune, publisher of the Chicago Tribune and Los Angeles Times, is selling assets and cutting jobs to counter continued ad declines and tackle $12.5 billion in debt. Zell, 66, reiterated that he "fully expects" Tribune to pay the $593 million remaining principal balance on a bank loan due in June 2009.
Tribune is in compliance with its debt covenants, Chief Financial Officer Chandler Bigelow said on the call. The company is "highly sensitive" to covenant compliance, Zell said.
Tribune's leverage ratio, the amount of debt relative to its cash flow, was 8.3 at the end of the second quarter, Bigelow said. Tribune had a leverage ratio of 8.1 at the end of the first quarter, and its lending agreements require that ratio to remain below 9 for the rest of the year, according to bond research firm CreditSights Inc.
When it reported second-quarter earnings Aug. 13, Tribune said it had repaid $807 million in debt using proceeds from the sale of commercial paper and Newsday. Zell told Bloomberg Television last week that he expects Tribune to be able to cover scheduled debt maturities until 2015. He said the company has other assets it can sell to provide liquidity.
Tribune eliminated 330 positions in the second quarter, Bigelow said today. It has cut about 930 jobs, or 7 percent of the workforce, year over year, he said. Tribune has added 90 employees to its broadcast news unit because that division gets its highest profit from local news, Zell said.
Deepening ad drops have forced Zell to accelerate what was intended to be a 2010 business plan and redesign of Tribune's publications. The company is seeking a buyer for the Chicago Cubs baseball team and exploring options for headquarters buildings in Los Angeles and Chicago. Zell said he expects to present Major League Baseball's owners with a Cubs deal by year-end.