Tribune posts loss, Moody's downgrades Gannett
NEW YORK (Reuters) - Tribune Co, the U.S. newspaper publisher and broadcaster trying to pay off billions of dollars in debt, reported a loss from continuing operations and a 10 percent revenue drop on Monday as advertising sales fell.
Separately, Moody's Investor's Service downgraded the debt of USA Today publisher Gannett Co Inc, the largest U.S. newspaper owner.
Tribune, the privately held publisher of the Chicago Tribune and Los Angeles Times, reported a third-quarter loss from continuing operations of $124 million, compared with a profit of $84 million in the same quarter a year ago.
Revenue fell 10 percent to $1 billion.
"They were slightly worse than our very low expectations," said Mike Simonton, an analyst at Fitch Ratings, which studies corporate debt.
Tribune, which took on about $13 billion of debt when it went private last year under a deal led by real estate mogul Sam Zell, is trying to sell off properties such as the Chicago Cubs baseball team to pay off its debt. It already sold the Newsday newspaper on Long Island, New York, to Cablevision Systems Corp.
During the quarter, Tribune sold a 10 percent interest in online jobs site CareerBuilder to Gannett for $135 million.
Tribune's big challenge is to avoid violating the lending terms, or "covenants," on what analysts estimate to be about $10 billion of guaranteed debt.
The company has to ensure that its debt is not more than 9 time the amount of earnings that it brings in before interest, taxes, depreciation and amortization, Simonton said. If debt rises too high as income falls, it could violate those terms.
"We would expect for the year end very challenging for them to meet their covenant threshold," Simonton said. "It appears there is very little room for further deterioration in the covenants."
In the third quarter, advertising revenue fell 19 percent, leading to a 13 percent drop in publishing revenue to $653 million. Expenses rose 6 percent to $640 million.
Ad revenue fell in every category, with classifieds falling 30 percent and online revenues falling 7 percent.
Broadcast and entertainment revenue dropped 6 percent to $383 million.
"We are operating in an exceptionally difficult financial and economic environment," Zell, Tribune's chief executive, said in a statement. "The newspaper industry continues to see extraordinary declines in ad revenues and Tribune is no exception."
Tribune paid $888 million in debt in the quarter, with $218 million coming from another credit line. For the balance, it used money from the Newsday and CareerBuilder deals. Continued...
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