Uh oh, here comes more bad news. The New York Times is reporting that our very own Chicago Tribune is suffering from serious financial distress and has hired investment bank Lazard and law firm Sidley Austin in an effort to avoid a potential bankruptcy filing. Just yesterday, the AP reported that the Tribune will sell off one of its biggest assets, the Chicago Cubs, no later than spring training.
But those who aren’t experts in Bankruptcy should know that Chicago’s most notable newspaper is not going to be history, per se. The Tribune is using this time to try and secure a line of credit to cover their debt. And if it turns out that filing for Chapter 11 is the right path to take, it still is very likely that the Tribune will stay with us. Filing for Chapter 11 will probably grant complete or partial relief from most of the company’s debt and contracts, allowing a debtor to stay in control in order to remodel the financial and organizational structure so as to permit the rehabilitation and continuation of a business.
Look at United Airlines. UAL filed for bankruptcy in December 2002, weakened by low-fare competition and a drop-off in air travel following the September 11, 2001, terror attacks on the United States. After one year in bankruptcy, the airline ended up saving $7 billion by eliminating 25,000 jobs, replacing traditional pensions with 401(k) plans, reducing cost structure and cutting pay.
Now, do not think that I am an advocate for bankruptcy. It is likely that a lot of the company’s assets will be stripped, which will include jobs and pension plans. A company should do everything in its power to prevent filing. But, if it turns out that filing is the only option, the Tribune will still likely survive.
If you find this to be interesting, make sure to investigate Professor Mason’s Bankruptcy course, which will be offered on Tuesday and Thursday nights this spring.