Nobody Has A Clue About How To Pay Down Debt, Including Bond Rating Agencies
Things are OK on Tribune's balance sheet -- for now.
That much is clear. But what Sam Zell and his minions have been unable to answer is what to do about next year. And the year after. After all, if revenue keeps dropping, how to you pay off the notes on the more than $12.8 billion in debt?
The troubling answer is all too apparent, but not enough people have made sufficiently portentous rumblings about what really is to come, at least no one who has really mattered. That has since changed, now that Fitch Ratings has warned of a real possibility of Tribune defaulting on its debt obligations.
Short-term, everything's hunky-dory relatively speaking. But Editor & Publisher reports Fitch is concerned about Tribune's ability to "generate meaningful and consistent revenue growth."
Given current trends that's hardly a news flash. I first wrote about Tribune's myopia back in April.
Quite simply, the amount of debt taken on outstrips the company's ability to generate sufficient revenues, especially on the print side.
Sure, some assets have been sold off ---- like Newsday for $650 million -- or will be shed -- the Cubs and Wrigley Field -- to ease some of the pain in the offing. But Zell hasn't offered any answers of what he'll do beyond mid-2009.
Surely he didn't buy Tribune just so he can sell it off piecemeal to satisfy his bankers. However, that's exactly what could result because of his stunning lack of hubris.
Even billionaires can find themselves in way over their heads. Zell is mustering everything he's got just to tread water. Unfortunately, that won't be enough when another tsunami of debt looms on the horizon.
Zell will be all right in the end. Most of the money used to buy Tribune wasn't his. The lucre from his savvier real estate dealings will still be his.
As for the newspapers that will be left in his wake, the outcome is bound to be much more tragic. Zell's swagger has now been replaced by silence. And that speaks volumes.