Chicago – Media group Tribune Co. took action Tuesday to boost its slumping stock price, announcing plans to buy back a quarter of its outstanding shares for more than $2 billion and pledging to sell at least $500 million in noncore assets. Its shares made their biggest jump in more than six years.
The newspaper publisher and radio- and TV-station owner said it intends to finance the repurchase with bank debt and bonds – underscoring the pressure to reverse a decline that had cut the value of its stock nearly in half since early 2004. It also targeted an additional $200 million in cost savings from existing operations over the next two years.
Wall Street welcomed the announcement, pushing Tribune’s stock price up $2.01, or 7.2 percent, to close at $29.90 on the New York Stock Exchange – its largest one-day increase since March 14, 2000.
But the company had its credit rating downgraded because of the higher debt load. Fitch Ratings lowered its issuer default rating to BBB minus from A minus with a negative rating outlook, noting that the leveraged buyback “represents a significant departure from Tribune’s historically conservative financial policies.” Standard & Poor’s also downgraded.
Separately, the company reached a settlement ending a two-year investigation by the Securities and Exchange Commission into inflated circulation figures at Tribune-owned Newsday and Spanish-language Hoy in New York. Tribune neither admitted nor denied the SEC allegations that it deliberately falsified the circulation figures but agreed to refrain from future violations of the securities laws. Nine former employees and contractors of the two papers have pleaded guilty to criminal charges related to the alleged scheme.
