Can Tribune Co. survive bankruptcy?

The good news is that today’s bankruptcy filing won’t make things much worse for the Tribune Co. The bad news is that the filing won’t improve things, either.

While bankruptcy protection in an ideal case enables a struggling company to restructure its debt, streamline its business and put itself on a sounder footing for the future, it’s hard to imagine how the newly unburdened Tribune Co. can improve its long-term prospects in the most toxic environment in history for newspapers.

In filing for bankruptcy in a federal court in Delaware, Tribune has erected a firewall between itself and the creditors who are owed some $12 billion. The company took the step because “we have too much debt in light of [a] dramatic and unexpected decline in revenues, which has been amplified by the current recession,” according to a statement posted in a QandA at its new bankruptcy information website.

Now that Tribune is under court supervision, it not only will be protected from its creditors but also will have the right to walk away from unnecessary leases on real estate, equipment and vehicles. It will be permitted to renegotiate bills owed to vendors of everything from newsprint to paperclips, likely enabling debts to be settled for cents on the dollar.

Wages, benefits and other obligations to employees usually are unaffected by a bankruptcy filing, but union contracts in some cases can be altered or abrogated.

Many employees who took buyouts in the last year got lump-sum payments but some people who were discharged more recently may be affected by the company's decision to discontinue pending severance payments, deferred compensation and certain other payments to former employees.

Outstanding payments to former employees will be subject to "later proceedings before the court," according to an internal statement quoted by LA Observed. Among those payments are some multmillion-dollar packages owed to former Times Mirror executives.

Bankruptcy typically wipes out the equity investors in a business. In this case, that would include Sam Zell, who ponied up $315 million to gain control of a company valued at $13.5 billion when he took it private a mere 353 days ago.

But the equity wipeout also may include the amount invested on behalf of the “about 20,000” employees who are members of the Employee Stock Ownership Plan that Zell created to enhance the tax efficiency of the transaction that netted him a company for which no other credible buyer emerged. Most of the retirement funds of Tribune employees are not invested in the ESOP, because the plan has been in existence for barely a year.

Tribune promises to take advantage of bankruptcy protection “to use our great brands and the enormous talent of our people to create a fresh, entrepreneurial company that rewards innovation and creates sustainable, relevant information products for our customers and communities.”

That sounds great. But there has been no evidence over the last year that Zell or the shock jocks he dispatched to run the company have any ideas about how to arrest the long-running decline in newspaper advertising that – significantly – predated their ownership. The decline has accelerated this year in the worst recession since the 1930s.

Fixing the Tribune would be a tall order for any management team, but it already has proven to be well beyond the capabilities of the incumbents. Far from effectively using Tribune’s brands, market power and talented staff, the Zellistas have terrorized the company through successive layoffs and pointless vindictive tirades.

The question now is whether the floggings will continue or whether the company – unshackled from an unconscionable debt load that bankers never should have sanctioned – will be truly free to try to invest in the innovative niche print, online and mobile products that could save its wasting franchises.

Or, will the Zellistas continue to strip-mine Tribune Co. until there is nothing left but the squeal?