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Tribune Co. expects $325-million dividend from publishing spinoff

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In spinning off its publishing business, Tribune Co. will pick up a dividend that could be about $325 million from the new public company, which would consist of the Los Angeles Times, the Chicago Tribune and six other daily newspapers.

Although the exact amount won't be determined until the separation agreement is final, expected in midyear, Tribune has indicated that the dividend it would receive from Tribune Publishing Co. would be worth about $325 million.

That figure is contained in a document related to Tribune's purchase in December of a group of television stations.

Information provided to prospective lenders Oct. 31 said that proceeds Tribune would receive "in connection with the proposed publishing spin-off" are expected to be used to repay $325 million of a $4.1-billion loan, which it is using to buy the TV stations and for other uses.

Tribune declined to comment on the dividend or other aspects of the planned spinoff. The final figure could be "slightly different," said one person with knowledge of the deal.

Adding debt to an asset before it's spun off "is not atypical," said David Bank, an analyst at RBC Capital Markets. "When you look at a business that you tend to see as less of a high grower, optimal capital allocation tends to drive you to lever it up and fund your higher-growing business."

Since emerging from Chapter 11 bankruptcy in December 2012, Tribune, based in Chicago, has staked its future on higher-growth broadcasting and entertainment businesses under Chief Executive Peter Liguori, a former television executive.

The company launched Tribune Studios and is turning cable channel WGN America into an original-programming network. Liguori added 19 television stations with the $2.7-billion acquisition of Local TV in Cincinnati.

In July, Tribune announced its intent to spin off its newspapers. With the spinoff, all 42 TV stations, programming businesses and significant digital assets, along with all real estate holdings, would stay with Tribune.

Tribune's plans for the split have raised concerns among some publishing industry analysts, and they prompted Rep. Henry A. Waxman (D-Beverly Hills) to speak up. He or his staff have met twice with Tribune officials. In a meeting with Liguori this month, Waxman expressed his concern that Tribune Publishing won't have adequate funding to be "viable."

Liguori said in a statement, "I was pleased to discuss our shared desire to ensure that the Los Angeles Times is well positioned to be a robust business and continue its best-in-class journalism."

Tribune Publishing plans to finance the cash dividend and additional working capital by taking on new debt, according to the Dec. 9 filing with the Securities and Exchange Commission.

Additional expenses would include about $30 million in annual rent that Tribune Publishing would pay to Tribune to lease space in its buildings through 2017.

rchannick@tribune.com

Copyright © 2014, Los Angeles Times
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