Fitch Places Tribune on Rating Watch Negative

NEW YORK--(BUSINESS WIRE)--Sept. 28, 2005--Fitch Ratings has placed Tribune's Co.'s 'A' senior unsecured, 'A-' senior subordinate, and 'F1' commercial paper credit ratings on Rating Watch Negative. The action affects approximately $1.9 billion of senior unsecured debt and approximately $1.3 billion face value of senior subordinated exchangeable securities ('PHONES').

The rating action reflects Tribune's announcement that, in association with its purchase of Times Mirror in 2000, the company is estimating an immediate tax liability of $1 billion, with a net cash outflow of $850 million (after state tax benefits and interest deductions) over the next six months. During 1998, Times Mirror disposed of its Matthew Bender and Mosby subsidiaries in separate tax-free reorganizations. Yesterday, the United States Tax Court disallowed the tax-free treatment. Tribune stated it will immediately appeal the ruling. The company intends to finance the cash payment with commercial paper borrowings.

Resolution of Fitch's Rating Watch will be determined by an evaluation of the company's long-term fiscal policies, including debt reduction plans, future levels of share repurchases given the company's depressed stock price, as well as dividend policies. Projected debt levels will be balanced against the company's pressured circulation and advertising performance, which Fitch believes could likely continue for the remainder of the year. The company's core newspaper and broadcasting businesses are trending negatively during a relatively positive stage of the economic cycle, and will likely endure sustained pressure as consumers and advertisers shift toward other forms of media. Pro forma for the $850 million debt financed tax payment, leverage including the debt component of PHONES increases to 2.2 times (x) from 1.5x for the latest 12-month (LTM) period ending June 26, 2005 (to 2.7x from 2.1x using the face value of the PHONES). Fitch believes these pro forma metrics are outside of the range of an 'A' rated company with the operational risks that are present within Tribune's industries and will evaluate the company's debt reduction plans as well as operational performance over the intermediate term to resolve the Rating Watch.

Tribune's liquidity is supported by $1.2 billion in bank credit facilities expiring Dec. 31, 2008 (which back up its commercial paper program) and the company's strong free cash flow. The commercial paper balance of $706 million, at June 26, 2005, was refinanced through a five-year and 10-year note offering completed August 2005. Debt, excluding the PHONES hybrid securities, declined from $2 billion at year-end 2004 to $1.9 billion at the end of the second quarter of 2005. The debt component of the PHONES hybrid securities, which are subordinated obligations, was approximately $448 million at June 26, 2005, with a total face value of approximately $1.3 billion maturing 2029. Pro forma for the additional debt associated with this announcement, Tribune will have a high degree of short-term debt ($850 million to $1 billion) and will face its first significant maturity in 2008 when its revolver comes due and $262 million of notes. Other maturities, including $17 million coming due in 2005; $293 million in 2006; $68 million in 2009; and $2.5 billion thereafter appear manageable.

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