Tribune Debt Default Risk Tops 50 Percent, Swaps Show

WOW! No wonder spreads are spiking across the board.... SCHADENFREUDE!

Kein Wunder das einige in heller Aufregung sind....... SCHADENFREUDE!

July 20 (Bloomberg) -- Tribune Co. has a 50-50 chance of missing interest payments on some of the $13 billion in debt it will have after real estate investor Sam Zell buys the company, trading in the company's credit-default swaps shows.

Prices of the swaps, financial contracts used to speculate on a company's ability to repay debt, have jumped $331,000 since the first step in the sale was completed in May. It costs $770,000 to protect $10 million of Tribune bonds for five years, according to CMA Datavision, indicating a more than 50 percent risk of default. That's up from 32 percent on May 24, based on a JPMorgan Chase & Co. pricing model.

Investor unease is being fed by a deepening advertising slump at Tribune, owner of 11 metropolitan newspapers including the Los Angeles Times. That newspaper had ``one of the worst quarters ever experienced,'' in the second quarter and Tribune publishing results generally were ``worse than the industry,'' Publisher David Hiller wrote in a July 13 memo.

``If you were unsure about a deal before, it's much worse now,'' said Dave Novosel, an analyst at Gimme Credit Publications Inc. in Chicago who rates Tribune bonds ``sell.''

Tribune revenue fell 11 percent in May, the company said June 20, and was down 5.6 percent for the year to $2.02 billion. The company reports second-quarter results on July 25.

Tribune swaps prices imply investors consider the company the fourth-riskiest debt issuer among the almost 1,200 worldwide whose credit-default swaps were quoted this week by London-based CMA.

`At Risk'
``Their capacity to service their obligations could certainly be at risk,'' said Mike Simonton, a credit analyst at Fitch Ratings in Chicago

Tribune has said in filings it will slash capital spending, eliminate dividends and use an employee-ownership structure to avoid taxes, conserving cash to make interest payments that New York-based Benchmark Co. analyst Edward Atorino estimated at $1.08 billion.

The company will earn $1.09 billion to $1.18 billion before interest, taxes, depreciation and amortization this year, estimates Deutsche Bank newspaper analyst Paul Ginocchio in New York. While the deal is ``more likely than not'' to be completed, ``there may be some unhappy lenders in the end,'' he wrote in a July 1 report. .... On May 24, Tribune bought back 126 million shares, using more than $4 billion borrowed from four banks, including Citigroup Inc. and JPMorgan Chase. Tribune plans to borrow another $4.2 billion by year-end to buy its remaining stock.

> I would like to hear what the bondholders are saying to the buybacks.......

> Würde gerne wissen was die Gläubiger zu diesen Rückkäufen sagen.......