The audacity of Zell

The just-posted WSJ story on the Tribune bankruptcy reads like an obit:

Fixing the newspaper-and-television company -- which Mr. Zell led an $8 billion effort to take private a year ago, mostly with borrowed money -- proved too much for the veteran investor in the face of a recession. Mr. Zell, who shares his hometown of Chicago with Tribune, fell victim to a toxic mix of Tribune's heavy debt, a faltering economy and an accelerating decline in advertising revenue. The same brew is expected to sour the performance of other debt-laden newspaper companies in coming months.

Zell told the Journal that he expects to keep the company intact, but would consider selling assets at the right price. Lots of luck, at least in the short term. Cash flow at the LAT has fallen to roughly $100 million this year, the Journal reports, compared with about twice that level in 2007. That's really a killer.

Although its diminished cash flow put real pressure on the company, Mr. Zell said he was aware of his predicament well before the broad financial meltdown that started in mid-September. Asked why he didn't explore the bankruptcy option sooner, he said, "There's this guy who was just elected president of the United States, and he wrote a book called 'The Audacity of Hope.'"

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Tribune is likely a harbinger of more pain across the newspaper industry. Several publishers, including Journal Register Co., the publisher of the Philadelphia Inquirer and the owners of the Minneapolis Star Tribune, are restructuring their debt with the cooperation of lenders. They or other debt-heavy groups may be headed down Tribune's path. Fitch analyst Mike Simonton said more worrisome than the number of newspaper groups in default is the fact that some, including A.H. Belo Corp. and Sun-Times Media Group, now are unprofitable on a cash-flow basis, and aren't in a position to service any debt. "That should raise red flags," Mr. Simonton said, adding that more papers can no longer offset revenue declines with cost cuts. "Closing some of them down as a loss-avoidance strategy may make more sense."