Tribune Gets Loans Modified and Itself Subpoenaed

Newsroom mergers in Connecticut questioned by state's attorney general
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CHICAGO: A federal judge allowed Tribune to modify credit terms just as another branch subpoenaed the media company and a state attorney general questioned its TV station plans.

Tribune’s plans to merge the news operations of two TV stations in the newspaper of record caught the attention of the state’s attorney general, Richard Blumenthal. One company cannot own the TV stations and newspapers in major markets under FCC rules, but Tribune received a waiver while the commission reconsiders the prohibition. It owns WTIC-TV and WTXX-TV, which it wants to mash with The Hartford Courant.

Blumenthal suggested the move would violate the intention of the FCC’s order, according to The Hartford Business Journal.

“I am concerned that allowing these entities to fully merge into one news and information operation goes well beyond what the FCC intended when it granted Tribune a two-year limited waiver,” Blumenthal reportedly wrote to Trib Chairman Sam Zell.

Meanwhile, Judge Kevin J. Carey of the U.S. Bankruptcy Court for the District of Delaware approved amendments to Tribune’s credit facilities that reduced its commitment by $80 million, according to Law360. The new terms leave Trib owing around $225 million on two particular loan vehicles originally due April 10, and frees up certain cash flow for operations.

Tribune holds about 10 major daily newspapers, 23 TV stations, cable TV and online interests, the Cubbies and Wrigley Field. The company was taken over and taken private in 2007 by Zell, a Chicago real estate investor. Tribune reported net income of nearly $87 million on revenues of more than $5 billion that year. By the end of the second quarter of 2008, Tribune posted a $4.5 billion loss on $1 billion in revenues, according to Hoovers.com. Struggling with $13 billion in debt, Trib filed for Chapter 11 last December. The company listed assets of $7.6 billion.

Much of the company’s debt resulted from Zell’s $8.2 billion leveraged buy-out, and the U.S. Department of Labor is now investigating the transaction, The Wall Street Journalreports. The DoL subpoenaed Tribune for information about its employee stock ownership plan--an element of the buy-out intended to circumvent corporate taxes. The deal was structured with the ESOP taking on the debt and receiving all common Tribune shares, which likely will be wiped out in the bankruptcy proceeding. -- Deborah D. McAdams