Tribune files for bankruptcy protection

Tribune Co, which owns eight major daily newspapers and 23 television stations, filed for Chapter 11 bankruptcy protection after collapsing under a heavy debt load just a year after real estate mogul Sam Zell took it private. Tribune's bankruptcy filing is the latest chapter in the unraveling of the leveraged buyout boom which saw many companies bought by private equity firms and other investors ending up with massive debt loads. Zell loaded up the privately held publisher with about $8 billion in additional debt when he took the company private in a transaction largely financed by company contributions to an employee stock option plan. Like other big companies which took on heavy debt burdens during the private equity boom, Tribune is now being forced to find a way to cut its borrowings to an amount it can handle. "This process of deleveraging America, whether financial institutions or Tribune, will be a long, slow and painful process," said Duke University Law School Professor James Cox. "That's what's going to prolong this recession." Most of the $8.2 billion Zell buyout price was paid for by the pensions of Tribune's 20,000 workers, held in an employee stock ownership plan, or ESOP. The ESOP structure was designed to reduce Tribune's taxes and it lowered Zell's own price tag to $315 million.