They are probably generating more than $440 million in operating income in their digital and broadcasting businesses. That's more than $1.28 per share in after tax operating profit.
How you get rid of the $3.8 bln in debt is the trick.
Publishing produced more than $900 million in operating profit over the entire year (almost $600 million in after tax operating profit). How that changes this year? Assuming publishing doesn't expire before 2012, there could be some value in the unsecured notes, trading at 60 for the 2012s and 67 for the 2011s.
If you assume publishing goes to zero and debt does not change by 2012, the enterprise value of the digital and broadcasting businesses might fetch $3 bln. Take away the revolving credit facility, which will be about $2.5 bln and you have $500 million of value to be divided between the two unsecured notes (aggregate value of $1 bln) and the pension fund members ($891 million liability at year end 2008).
Worst case, maybe 25% on the notes, assuming noteholders and pension members are treated equally (-58% capital loss offset by whatever interest gets paid at 10.625% current yield until re-org. on the 2012s).
Best case, debt gets whittled down by continued cash flow generation in the publishing assets, maybe $300 million a year over the next 3 years. Debt ends up around $2.9 bln in 2012, all in the revolver (assuming they can increase their lines by approx. $200 million). That suggests a 67% capital gain augmented by 10.625% current yield until April 2012 on the 2012s.
Assign your probabilities...