Recycling goes from boom to bust as economy stalls & Tribune in Trouble & Times Co. Taking Debt to Save Co.

[Mrs. Sharon B. Hodge]

Recycling goes from boom to bust as economy stalls
By P.J. DICKERSCHEID, Associated Press Writer


CHARLESTON, W.Va. – Norm Steenstra's budgeting worries mount with each new load of cardboard, aluminum cans and plastics jugs dumped at West Virginia's largest county recycling center.
Faced with a dramatic slump in the recycling market, the director of the Kanawha County Solid Waste Authority has cut 20 of his 24 employees' work week to four days from five, shuttered six of the authority's drop-off stations and is urging residents to hoard their recyclables after informing municipalities with curbside recycling programs that the center will accept only paper until further notice.
"The market is just not there anymore," Steenstra said.
Just months after riding an incredible high, the recycling market has tanked almost in lockstep with the global economic meltdown. As consumer demand for autos, appliances and new homes dropped, so did the steel and pulp mills' demand for scrap, paper and other recyclables.
Cardboard that sold for about $135 a ton in September is now going for $35 a ton. Plastic bottles have fallen from 25 cents to 2 cents a pound. Aluminum cans dropped nearly half to about 40 cents a pound, and scrap metal tumbled from $525 a gross ton to about $100.
It's getting more difficult to find buyers in some markets, Steenstra said.
While few across the country appear to be taking such drastic measures as Steenstra, the recycling market has gotten so bad that haulers in Oregon and Nevada who were once paid for recyclables are now getting nothing or in some cases are having to pay to unload their wares.
In Washington state, what was once a multimillion-dollar revenue source for the city of Seattle may become a liability next year as the city may have to start paying companies to take their materials.
Some in the business are describing the downturn as the worst and fastest ever.
"It's never gone from so good to so bad so fast," said Marty Davis, president of Midland Davis Corp. in Pekin, Ill., who has been in the recycling business since 1975.
The turnaround caught everyone off guard, said Steven Kowalsky, president of Empire Recycling in Utica, N.Y.
"Nobody saw it coming. Absolutely nobody," Kowalsky said. "Even the biggest players didn't see it coming."
At the height of the market just months ago, customers lined the street outside Kowalsky's business, hoping to hawk scrap to pay rising food and fuel costs.
"That's not happening anymore," he said.
The Kanawha County authority, which sells donated recyclables from residents and municipalities, sells about 7,500 tons of paper, plastic and aluminum a year, Steenstra said.
Ted Armbrecht III, managing partner of The Wine Shop at Capital Market in Charleston, says it won't be a problem piling up his recyclables at home, but he doesn't have that luxury with his wine business, which uses a lot of cardboard boxes.
"We'll hold onto it as long as we can, but once it reaches a tipping point, the only other place it's going to go is the dumpster," he said.
Trey Granger, spokesman for Earth911, a national environmental resource group, said the public's interest in recycling should be able to weather the downturn in an industry that has been growing for more than 30 years and has always been cyclical.
"Obviously times are tough," Granger said. "I wouldn't worry more about this more than any other aspect of the economic downturn we're facing."
Last year, Americans generated about 254 million tons of trash, according to the U.S. Environmental Protection Agency. They recycled about 150 million tons of material — roughly 80 million of that in iron and steel — supporting an industry that employs about 85,000 with $70 billion in sales, said Bob Garino, director of commodities at the Institute of Scrap Recycling Industries Inc., a Washington, D.C.-based trade association that represents more than 1,600 companies worldwide.
Most recyclables are shipped to Asian countries that use the material to make products that are shipped backed to the United States to be sold.
But the market shift is now jeopardizing hundreds of millions of dollars worth of long-term contracts for scrap metal as some companies that signed when prices were high are trying to cancel or postpone deliveries to take advantage of the cheaper spot market, Garino said.
Davis, of Midland Davis Corp. in Illinois, said he hopes to wait out the market and may rent warehouse space to store his more perishable recyclables, like paper, until he can find buyers. He has some room to stockpile cans and plastics because in July, when prices were high, he unloaded more material than during any month in the past 10 years.
"It's going to be bleak for a while," he said. "We can just make our piles taller, and hopefully by spring, things will be a little better."
Whether that will come as early as spring is debatable.
"I don't know if we are at the bottom yet, bouncing along the bottom or we have new lows to achieve," Garino said.
The market's not likely to bounce back until the economy improves. Kowalsky estimates it could be several years.
"It's just time to pull in your horns and maintain what you have and try to survive until 2010," he said.



Tribune May Face Potential Bankruptcy Filing

Tribune has hired bankruptcy advisers as the ailing newspaper company faces a potential bankruptcy filing, people briefed on the matter said.

The newspaper, which was taken private last year by billionaire investor Samuel Zell, has hired advisers including Lazard and Sidley Austin, one of its longtime law firms, these people said. Tribune has been hobbled by debt related to that sale last year, which has been compounded by the growing drought of advertising for newspapers.

It is only the latest — and biggest — sign of duress for the newspaper industry yet. Several newspaper companies have struggled to cope with declining revenues and mounting debt woes. Tribune has pared back the newsrooms of many of its papers, including The Chicago Tribune, The Los Angeles Times and The Baltimore Sun, and it sold off Newsday to Cablevision’s Dolan family earlier this year.

While Tribune must contend with hefty interest payments over the next year, its most pressing problem is a maintenance covenant on some of its debt that limits the company’s borrowings to no more than nine times earnings before interest, depreciation and amortization.

Even if the company continues to make interest payments, failure to maintain that level of debt means technical default — which does not always lead to a bankruptcy filing. Other newspaper publishers have halted making interest payments on their debt, but have yet to file.

A CreditSights analyst, Jake Newman, wrote in a research report published last month that Tribune avoided technical default in the third quarter partially through some accounting adjustments. “We think the company will have difficulty meetings its year-end covenant compliance,” Mr. Newman wrote.

Tribune has sought to ameliorate its woes by selling off assets like the Chicago Cubs, the company still faces a looming debt crunch. Tribune hired Lazard several weeks ago to assess its options, these people said. Sidley Austin is a longtime outside adviser to Tribune, and it has a well-respected bankruptcy practice as well.

The company’s problems have long been reflected in the price of its bonds. Tribune bonds maturing Aug. 15, 2010 with a 4.88 percent coupon traded at $13.25 on Friday, suggesting severe levels of distress.

–Michael J. de la Merced, Richard Pérez-Peña and Andrew Ross Sorkin



Times Co. to Borrow Against Building
http://topics.nytimes.com/top/reference/timestopics/people/p/richar...


The New York Times Company plans to borrow up to $225 million against its mid-Manhattan headquarters building, to ease a potential cash flow squeeze as the company grapples with tighter credit and shrinking profits.

The company has retained Cushman & Wakefield, the real estate firm, to act as its agent to secure financing, either in the form of a mortgage or a sale-leaseback arrangement, said James M. Follo, the Times Company’s chief financial officer.

The Times Company owns 58 percent of the 52-story, 1.5 million-square-foot tower on Eighth Avenue, which was designed by the architect Renzo Piano, and completed last year. The developer Forest City Ratner owns the rest of the building. The Times Company’s portion of the building is not currently mortgaged, and some investors have complained that the company has too much of its capital tied up in that real estate.

The company has two revolving lines of credit, each with a ceiling of $400 million, roughly the amount outstanding on the two combined. One of those lines is set to expire in May, and finding a replacement would be difficult given the economic climate and the company’s worsening finances. Analysts have said for months that selling or borrowing against assets would be the company’s best option for averting a cash flow problem next year.

Standard & Poor’s recently lowered its credit rating on the Times Company below investment grade, and Moody’s Investors Service has said it was considering a similar move. Times Company stock, which has lost more than half its value this year, closed on Friday at $7.64, down 30 cents.