The publisher of the Chicago Tribune and the Los Angeles Times declared bankruptcy on Monday as the American newspaper industry's unrelenting loss of readers and advertisers claimed its biggest victim yet.
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.
Like other big US newspapers, Tribune is under pressure from declining advertising revenue and circulation as more people get news online and as companies cut their marketing budgets because of the economy.
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.
Mr Zell loaded up the privately held publisher with about $US8 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.
"It has been, to say the least, the perfect storm," Mr Zell said in a memo to employees. "A precipitous decline in revenue and a tough economy have coupled with a credit crisis, making it extremely difficult to support our debt. All of our major advertising categories have been dramatically impacted."
Tribune had $US7.6 billion in assets and $US12.97 billion in debt as of Monday,
according to its bankruptcy filing.
Most of the $US8.2 billion Mr Zell buyout price was paid for by the pensions of Tribune's 20,000 workers, held in an employee stock ownership plan.
"There's been so much bad news constantly lately, everyone's just shrugging their shoulders," a Tribune newsroom staffer in Chicago said. "It's just one more day of more disappointing news."
Even newspaper publishers which have not borrowed heavily have been struggling to cope, including The New York Times Co, which is re-evaluating its assets while slashing its dividend.