Tribune Publishing to take on $325 million in debt
Tribune Publishing, the newspaper division of Chicago-based Tribune Co., will carry at least $325 million of debt when it spins off as a standalone company, according to a filing Friday with the Securities and Exchange Commission. That bulk of that figure is a $275 million dividend that Tribune Publishing will pay to its parent company. Tribune Publishing is in discussions with lenders to finance the cash dividend and additional working capital by taking on new debt, according to the filing.In addition to the $325 million term loan, Tribune Publishing is seeking a revolving credit facility of $120 million to $150 million, and a separate $60 million line of credit. It expects the revolving credit facility to be untapped at the time of the spinoff. The capital structure of the nascent publishing company was revealed in an amendment to a December filing, which outlined the planned spinoff of the Chicago Tribune, Los Angeles Times and six other daily newspapers, expected by midyear. Last month, Tribune Co. named longtime magazine executive Jack Griffin as inaugural chief executive of Tribune Publishing. Griffin, who spent years with Meredith Corp. and briefly led Time Inc., is set to take the reins on Monday. Eddy Hartenstein, publisher and CEO of the Los Angeles Times, was named nonexecutive chairman of the board last month. Friday's filing filled in the names of the rest of the board. In addition to Hartenstein and Griffin, the six member board will include David E. Dibble, Philip G. Franklin, Renetta McCann and Ellen Taus.
Dibble, 54, was a technology executive at Yahoo from 2008 to 2013. Franklin, 62, is chief financial officer of Littelfuse Inc., a manufacturer of electronic components. McCann, 57, is chief talent officer at Chicago-based ad agency Leo Burnett. Taus, 55, is chief financial officer of The Rockefeller Foundation.
Griffin worked with Tribune Co. most of last year as a consultant, helping to reorganize Tribune Publishing in preparation for its spinoff. Last year, the publishing division eliminated approximately 830 positions across its eight daily newspapers, according to financial statements.Since emerging from Chapter 11 bankruptcy in late 2012, Tribune Co. has staked its future on higher-growth broadcasting and entertainment businesses under Peter Liguori, a former television executive. In December, the company added 19 television stations with the $2.73 billion acquisition of Cincinnati-based Local TV.Tribune Co. announced last summer its intent to spin off its newspapers. The move would allow it to offload the business while avoiding the large capital gains taxes it would incur from any outright sale, with stakeholders receiving a tax-free distribution of shares in the new company. Tribune Publishing received a 'favorable private letter ruling' from the Internal Revenue Service on March 7, according to financial statements, a prerequisite for the tax-free distribution. With the spinoff, all 42 TV stations, programming businesses and significant digital assets, along with all real estate holdings, would stay with Tribune Co.In a letter to Liguori sent prior to the SEC filing Friday, Rep. Henry A. Waxman (D-California) reiterated concerns that 'the high debt burden and inequitable asset split...will place the long-term viability of the Los Angeles Times and other Tribune papers at risk.'
Waxman said he consulted a number of academic experts who expressed concerns about the cash dividend Tribune Publishing would pay. In response to the letter, Hartenstein told the Los Angeles Times he was 'extremely confident that the plan put forth by Tribune Co. is sound, reasonable and will help protect and build a strong future for the Los Angeles Times and Tribune's other newspapers for years to come.'
'From our ongoing discussions, Congressman Waxman should by now be fully aware that the structure of the spinoff of Tribune Publishing is based on sound financial principles and a deep commitment to providing Tribune's newspapers with a strong, long-term future,' Hartenstein said.
'The assertions of the academics consulted by the congressman provide no new insight and in many cases are simply wrong,' he said.Tribune Co.'s publishing business saw operating revenues decline by 6 percent to about $1.89 billion in 2013, according to financial statements. Last year, publishing operating profit was $234 million, up from $89 million in 2012. Beyond the new debt service, additional expenses going forward include about $30 million in annual rent that Tribune Publishing would pay to Tribune Co. to lease space in its buildings through 2017.
rchannick@tribune.com
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