Tribune Company's Credit Rating Dropping Below Junk Bond?

The bad news just keeps coming for the old media, this time for major newspaper publisher the Tribune Company which may see its corporate bonds relegated even lower in the "junk bond" category.

Standard & Poor's Corp. put Tribune Co.'s already junk-rated debt under review for possible downgrade Friday, saying the Chicago-based media company's newspaper publishing group is likely to face further erosion of advertising revenue.

In placing Tribune's corporate credit rating on CreditWatch with negative implications, the debt-rating concern cited "our expectation that the rate of decline in advertising revenue at Tribune's newspaper publications may not improve appreciably and may worsen over the intermediate term."

In December, immediately after Tribune was taken private through a heavily leveraged $8.2 billion buyout led by real estate billionaire Sam Zell, S&P lowered the company's debt by one notch, to B from B-plus.

The New York company said Friday that it had factored into the December rating "our expectation that newspaper advertising and circulation revenue at Tribune would decline in 2008, but at lower rates than ... 2007."

But now, S&P said, the newspaper sector has been demonstrating "weakening in operating trends." For Tribune, whose newspapers holdings include the Chicago Tribune and the Los Angeles Times, that could mean a bigger-than-expected dip in profitability, with the potential for a slimmer cushion between Tribune's operating performance and the requirements spelled out in the covenants that govern its bank facility.

A Tribune spokesman declined to comment on S&P's action.

If the same simple-minded approach to Iraq news were applied to this story, the conclusion is inevitable: the Tribune Company should withdraw from the newspaper publishing business.

Of course, the media would never make such an argument because they understand their business well and are extremely committed to staying in business despite hardships because they think they are engaged in a worthy cause. Unfortunately for the public, left-leaning reporters seem incapable of realizing that this line of thought is a legitimate viewpoint when it comes to Iraq. The non-stop bias when things weren't going well there and news blackout now that things are going much better is a sad testament to this fact.