Black Monday for the US Newspaper Industry

Indeed it was Black Monday for the US newspaper industry, as both the Tribune Company and the Old Lady of the US newspapers, The New York Times, reported distressing news on their operations, following reports on Saturday that the country's third largest paper, the Miami Herald, is up for sale.

The Chicago Tribune building (EPA photo)

The Tribune Company, parent company of the Chicago Tribune, the Los Angeles Times and many others, announced that it would be seeking bankruptcy protection under the heavy load of a $13-billion debt.

This is the first time a major newspaper publisher is forced into bankruptcy protection ever since the rise of the  Internet marked the decline of the newspaper industry in the US.

Here's from the Los Angeles Times:

Tribune Co. directors approved the action to seek Chapter 11 protection in a meeting today, saying they want to restructure payments to banks and other creditors, following real estate magnate Sam Zell's purchase of the company last year.

"A precipitous decline in revenue and a tough economy have coupled with a credit crisis, making it extremely difficult to support our debt," Zell said in a statement to employees just before 11 a.m. Pacific time. "All of our major advertising categories have been dramatically impacted."

The Chicago-based company had roughly $300 million cash on hand, more than enough to make a $70-million payment due today. But executives reportedly were unable to persuade lenders to undertake a broader restructuring of the debt.

Also, The New York Times, the Old Lady and paper of record in the United States, reported that it will borrow up to $225 million "to easy a potential cash flow as the company grapples with tighter credit and shrinking profits." The company will use its brand new building (below) as collateral for the loan.

The company has two revolving lines of credit, each with a ceiling of $400 million, roughly the amount outstanding on the two combined. One of those lines is set to expire in May, and finding a replacement would be difficult given the economic climate and the company’s worsening finances. Analysts have said for months that selling or borrowing against assets would be the company’s best option for averting a cash flow problem next year.

The Times reported on Saturday that yet another emblematic US newspaper, the Miami Herald, is also for sale.

The country's third largest paper, and the largest in the McClatchy Company, is reportedly on the selling block because of a combination of factors, including shrinking profits, the economic downturn and a steep decline in advertising sales.

Here's from The Times:

The people briefed on the company’s plans say The Herald generates a very slim operating margin and that the most attractive part of any deal could be its prime waterfront real estate. But the Florida real estate market is in deep recession — one of the reasons for the struggles of the paper, which used to benefit from heavy real estate advertising.

The fateful trifecta comes on the heels of a long string of news on the US newspaper industry's dismal economic numbers, including a last quarter report that posted the industry's worst performance since record-keeping started.