The Breakdown

Explaining Southern California's economy

Rep. Henry Waxman raises concerns about Tribune Publishing

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A Southern California Congressman has raised questions about Tribune Co.'s plans to spin off its daily newspapers, including the Los Angeles Times, into a separate business. 

Rep. Henry Waxman (D-CA), in a letter to Tribune's CEO Peter Liguori, expressed concern that the finances of the spin-off company, Tribune Publishing, would be strained and that Tribune Co. might not be acting in the best interest of the Los Angeles Times.

In his letter, Waxman noted that Tribune Publishing would not own the buildings in which the newspapers and its staffs currently operate. Instead, it would need to pay rent for those buildings.

Waxman also was troubled that Tribune Publishing would pay a cash dividend to Tribune Co. through debt financing. The structure of Tribune Publishing is outlined in documents filed with the U.S. Securities and Exchange Commission.

"The requirement that the newspaper unit go into debt to pay a cash dividend to the Tribune Company will undoubtedly enrich the Tribune Company, but it may do so at the expense of the financial health of the Los Angeles Times and the other papers in the newspaper unit, all of which are already facing financial strains,"  Waxman wrote.

Waxman said in his letter that he wants to meet with Tribune Co. and learn more about why they plan to structure Tribune Publishing this way.

Tribune Co. spokesman Gary Weitman said the company has been in touch with Waxman's office to schedule a meeting and are happy to address his questions.

"Tribune remains fully committed to the long term vitality of the LA Times and all of Tribune publishing," Weitman said in an e-mail.

Media consultant Alan Mutter said Waxman's concerns are valid, but added Tribune is under no obligation to change their minds because they are a privately-held business.

Tribune is not the first company to spin-off its newspapers. Mutter said the Tribune papers are at a disadvantage in their spin-off because they will borrow money to pay the cash dividend and not own the buildings they operate in.

"It's sort of like being kicked out of the house and not being allowed to take your clothes and shoes. (You're) given a little knapsack and a crust of bread and told to fend for yourself," Mutter said. "It's not a very pleasant parting for the publishing group."

The concerns about the spin-off come as Tribune Co. plans to cut about 700 jobs by 2014 as part of a larger restructuring effort.

There's also more competition on the horizon. The parent company of the Orange County Register, Freedom Communications, plans to launch its own daily newspaper called the Los Angeles Register next year.

 

 

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