The Morning Report
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Could the Tribune Co. convince a bankruptcy judge to let it buy The San Diego Union-Tribune? The odds are against it, a bankruptcy specialist said today, but such a purchase wouldn’t be unprecedented.
“It’s possible that the court would allow this to happen, even though it’s flatly in violation of traditional bankruptcy practices,” said Lynn LoPucki, professor of law at UCLA.
The key, LoPucki said, is that the bankruptcy case is being heard in Delaware, which has traditionally been sympathetic to corporate interests.
Despite a continuing avalanche of rumors, there’s no public indication that anyone is about to buy The San Diego Union-Tribune. The newspaper industry is collapsing and credit is largely unavailable.
However, the Los Angeles Times reported earlier this month that the Tribune Company had considered buying the U-T and the Orange County Register “in an effort to consolidate the Southern California market for print and online advertising.”
The Tribune owns the LA Times, Chicago Tribune and other papers.
There’s a hitch: The Tribune Co., with a reported $13 billion in debt, applied for bankruptcy protection earlier this month. But the LA Times paraphrased Tribune owner Sam Zell as telling the media that “strategically sound deals probably would be approved by the bankruptcy judge.”
The purchase of a major newspaper like the U-T — perhaps worth hundreds of millions of dollars — could be a tough sell for Tribune.
Bankrupt “companies tend to be short of cash, and the courts generally disfavor acquisitions,” said LoPucki.
Still, Tribune Co. filed for bankruptcy in Delaware, a state that LoPucki calls an “on-shore haven.”
“Delaware attracts companies by appealing to management,” he said, and by giving company executives and board members “more and more freedom to do whatever they want.”
If a bankruptcy judge refuses to allow the Tribune Co. to buy the U-T, there’s another possibility: Tribune could simply hold tight, said Peter Morici, a professor of international business at the University of Maryland.
Instead of buying the U-T now, Tribune could wait until the bankruptcy case is over, said Morici, who recently testified in front of the U.S. Congress about the automaker bailout.
Bankruptcy cases typically last about a year, he said.