A filing by Tribune Company with the Securities and Exchange Commission (SEC) has given a peek into the gloomy future of the Los Angeles Times—arguably the nation’s second-best newspaper a decade ago; always and still profitable—as the parent spins off its newspapers into a separate, publicly-traded company. 

Staying profitable, even in an industry that has been downsized as much as print media, won’t be made any easier by what Tribune is planning for the Times, Chicago Tribune, Baltimore Sun, Orlando Sentinel and its four other newspapers. The publishing unit is being systematically stripped of its assets and revenue streams, saddled with new debt and left to run a business with many of its centralized Tribune business functions lost.

There was talk of a first-quarter spinoff, but the target is now the second quarter with no precise date set. The imprecision of the spinoff and other missing details has some speculating that Tribune is still angling for a sale, despite daunting tax disincentives and  lackluster interest.

Tribune has been jointly controlled by its three major debtors, Oaktree Capital Management, Angelo, Gordon & Co. and JPMorgan Chase since emerging from bankruptcy. The bankruptcy, which lasted from 2008 to 2012, was preceded, if not precipitated, by a purchase of the company financed by billions in debt obligations. Sam Zell took the company private in a leveraged buyout in 2007.  

The SEC filing says that Tribune will extract an unspecified payoff from the new publishing unit, once it is spun off, and expects the “dividend” to be funded “with proceeds from debt financing that we anticipate arranging prior to the distribution.”  

It also looks like the publishing unit will lose two affiliated online companies that made the company $86 million last year, according to Crain’s. The original Tribune, which will be dominated by its broadcast and digital media holdings, will maintain 1.5% ownership of the publishing company, allowing it to contractually continue the lucrative relationship with Career Builder and Classified Ventures.

Tribune has already made clear that it is keeping the real estate, which includes the block where the Los Angeles Times sits downtown and Tribune Tower in Chicago. The company hired a real estate chief in July to see what could be peddled or otherwise utilized. Tribune already rents out most of the Times building and extracts compensation from Times revenues for the newspaper’s occupancy.

Kevin Roderick at LA Observed (a former Times employee, as am I) says he heard the newspaper moved an event it hosts in an onsite auditorium for The Envelope Hollywood Awards to the University of California because of the price. If not true, it has the familiar apocalyptic ring Times staffers have grown used to over the past decade, where regular bursts of layoffs and buyouts continue unabated.

The SEC filing did not indicate who would sit on the new publishing company’s board of directors. Some speculate that the company will be bought either shortly after, or possibly before, the spinoff.  

Tribune has a market capitalization of $6.11 billion. The stock price has rocketed this past year in anticipation of Tribune successfully jettisoning its laggard publishing business, which will confusingly retain the name Tribune Publishing, and capturing its assets. It closed at 74.35 in OTC trading Wednesday, 54.8% over its 52-week low of 48.375. The stock is up 9% in the last 20 days.

That’s good news for someone.

–Ken Broder 

To Learn More:

Tribune Files Plan with SEC ahead of Publishing Unit Spinoff (by Robert Channick, Chicago Tribune)

Tribune's Newspaper Unit to Take on New Debt after Spinoff (by Lynne Marek, Crain’s Chicago Business)

Tribune Company Says Spin-off of Publishing Still Set for 2014, but Many Details Remain Missing (by D.B. Hebbard, Talking New Media)

Tribune Moves Forward with Newspaper Unit Spinoff (by Walter Hamilton, Los Angeles Times)