Monday, July 7, 2008

Tribune Gets New $300M Loan

Variety magazine has just reported that Tribune got a new $300 million loan to -- get this -- pay off an existing loan. And if that weren't bad enough, the loan from Barclays Bank is guaranteed by Tribune's accounts receivable.

When you have to guarantee a loan with money you expect to come in - any day now, of course - then cash flow is indeed tight. In fact, there may even be a cash flow shortage, meaning there's not enough cash on hand. We know this because Tribune is laying off people by the dozens in paper after paper, as well as cutting back on pages to save newsprint costs. Labor and newsprint are the two largest newspaper expenses.

According to Variety, about $200 million of the loan will be used to pay down a $1.4 billion loan scheduled to be repaid about a year from now. A humungous $650 million of the $1.4 billion comes due in December 2008. Considering the meltdown of the newspaper industry taking place right now, it's safe to say that it's unlikely Tribune will come into that kind of cash in six months.

How do you spell d-e-f-a-u-l-t?

No comments: