Tribune Co faces default threat in '09

By Robert MacMillan and Kenneth Li - Analysis

NEW YORK (Reuters) - Tribune Co is at risk of defaulting on its debt in as little as 18 months if the newspaper business deteriorates further, and it fails to unload more properties.

By some estimates, Tribune could fetch $1.6 billion for the Newsday daily paper and the Chicago Cubs baseball team and related properties, the assets it has already put on the block.

Newsday has already attracted interest from News Corp's (NWSa.N: Quote, Profile, Research, Stock Buzz) Rupert Murdoch and New York Daily News owner Mortimer Zuckerman.

Still, Tribune has nearly $4 billion in debt and interest payments due by the end of 2009, according to Gimme Credit analyst Dave Novosel, making it all but certain that the company will be forced to sell more marquee properties and make deeper cost cuts to avoid violating debt covenants.

"Tribune is a big microcosm of issues across the industry, and Sam Zell made an unfortunate bet, if you will, jumping into a business he knew nothing about," said veteran newspaper analyst Miles Groves.

Zell, a Chicago real estate tycoon, took Tribune private last year in an $8.2 billion leveraged buyout that restructured the publisher of the Los Angeles Times as an employee-owned company, saddling it with more than $10 billion in debt.

As recently as December, at the time of the deal's closing, Zell was pledging to keep Tribune intact, except for the Cubs.

A major asset sale would be seen not only as a failure for the man who dubs himself "The Grave Dancer" for coaxing big profits from distressed businesses, but also as a warning to other would-be saviors of the troubled newspaper industry.