Trib boss Zell on way out (Dinosaur Media DeathWatch™)

Chicago Sun-Times ^ | August 14, 2009 | David Roeder

[abb]

Sam Zell's days as a media titan in Chicago are nearly over.

The motorcycle-riding billionaire, renowned for his deft touch with real estate and corporate turnarounds, took Tribune Co. private in late 2007 promising to energize the lumbering company. He piled on debt at exactly the wrong time, and a collapse in advertising for traditional media forced him to take the company to Chapter 11 bankruptcy. » Click to enlarge image Tribune Co. Chairman and CEO Sam Zell (AP)

Eight months after the filing, two sources familiar with the process said creditors are working on a reorganization plan that elbows Zell aside. The creditors, including investment banks owed $8.6 billion from Zell's Tribune takeover, would stage a takeover of their own and sell off the company's newspapers and broadcast stations as they see fit.

"The banks will be in charge," one insider said, adding that they are growing impatient with Zell's stewardship. The bankruptcy court on Monday granted Zell extended time, until Nov. 30, to be the first to file a reorganization plan. Creditors have to wait at least that long before filing their own plan with the court.

William Brandt Jr., a corporate turnaround expert not involved in the case, said enough time has passed so that creditors and the debtor want to cut losses and save face. He said an honorable exit is especially important to Zell, who might need investment banking help for future deals.

"This was a textbook case of a leverage buyout gone bad," said Brandt, president of Development Specialists Inc. "These were imbeciles who had no idea what they were doing."

Brandt said Zell waited too long to sell major assets, accomplishing only a $650 million sale of Newsday, the Long Island-based daily. A sale of the Tribune-owned Chicago Cubs for around $900 million is not final and suffered a months-long detour when Zell tried to sell Wrigley Field separately to an arm of state government.

Still, Tribune financial reports filed with the bankruptcy court show recent improvement. The company's cash on hand rose to $740.5 million as of June 28, up from $702 million in late May. It reported profitable operations in June aside from debt obligations, but for the period from Dec. 8, 2008 to June 28 it said it lost $836.5 million. The numbers don't include units such as the Cubs, which were left out of the bankruptcy filing.

Tribune spokesman Gary Weitman said, "Since going private, we have re-engineered many of our existing products and introduced new ones, expanded our local news programming, dramatically reduced our expenses and positioned the company to succeed in the face of an extremely difficult ad environment and a worsening economy."

He added that Zell and other managers "remain actively engaged and committed to Tribune. The restructuring is still in progress and we continue having positive discussions with our various creditor constituencies. It is premature to speculate about the company's final ownership structure."

While the company has laid off workers, it has hired others to fill new needs. Bankruptcy experts said creditors usually don't object to such new expenses if they believe they help preserve value.

Tribune debt recently traded for about 7 cents on the dollar, meaning investors think a lottery ticket is just as likely to pay off. The company's total debt, counting what Zell assumed in his takeover, is around $13 billion.

Brandt said the Tribune deal has become such a "reputational disaster" for Zell that's he's probably not involved much in management other than creditor negotiations. That could be one reason the company wants bankruptcy court approval to pay bonuses of about $70 million to top managers.

Tribune owns the Chicago Tribune, the Los Angeles Times and other major newspapers, as well as WGN-TV and radio and 22 other TV stations.

David Wirt, chairman of the bankruptcy practice at the firm Locke Lord Bissell & Liddell, said Zell may be getting pressure because creditors want to see revenue growth, and not just cost-cutting. Also, the bankruptcy process is expensive and participants tire of paying lawyer fees that can top $800 an hour for senior partners, said Wirt, whose firm is not involved in the case.

In late 2008, debt analyst Mike Simonton of Fitch Ratings estimated Tribune was worth about $4 billion if sold. Since then, the company's balance sheet has worsened. As of June 28, Tribune said its liabilities exceeded assets by $7.1 billion, vs. $5.7 billion at the time of Simonton's estimate.

Even after a drawn-out liquidation, creditors may be lucky to get a third of their investment back.

[abb]

http://www.deadlinehollywooddaily.com/big-media-to-compete-with-nielsen-tv-ratings/
Big Media To Compete With Nielsen Ratings

[Milhous]

AP Bans Use of Famed Woodstock Photo By Members

Great! Spewage from mass media tools of the state truly belongs behind a paywall out of public purview.

While Woodstock Rocked, GIs Died

Antime someone brings up Woodstock, I bring up General Peter Muhlenberg's famous sermon at Woodstock and I get to expound upon the religious foundations of our founders that bought the freedoms we enjoy.

Here is what the Library of Congress has to say about Gen. Muhlenberg.

"A Fighting Parson

Peter Muhlenberg (1746-1807) was the prime example of a "fighting parson" during the Revolutionary War. The eldest son of the Lutheran patriarch Henry Melchoir Muhlenberg, young Muhlenberg at the conclusion of a sermon in January 1776 to his congregation in Woodstock, Virginia, threw off his clerical robes to reveal the uniform of a Virginia militia officer. Having served with distinction throughout the war, Muhlenberg commanded a brigade that successfully stormed the British lines at Yorktown. He retired from the army in 1783 as a brevetted major general."

Library of Congress Link

Here is a statue of him in the U.S. Capitol



Now that is what I think about when anyone brings up Woodstock.

[abb]

http://www.adweek.com/aw/content_display/news/media/e3i8fb28a31928f66a5d1b8d15fe236718e
Agencies, Media, Clients Ally for Video Initiative
Single-source audience measurement is the goal

http://graphicdesignr.net/papercuts/
2009 total: 13,253+ jobs
Layoffs and buyouts at U.S. newspapers in 2009

[Landru]

Hey Milhous, good to see you're still knockin' 'round out there. ;^)

"Dvorak says:..."

Smart guy, that Dvorak fella. ;^)

Great to see the Dodo.
Was such a great idea. ~sigh~

Well, keyboard warriors? Mount up -- Forward Ho'!! :o)

[abb]

More developments.

http://www.chicagotribune.com/business/chi-sat-tribune-bankruptcy-aug15,0,2719612.story

Tribune Co. creditors seek special counsel to probe buyout, could sue to recover money

By Ameet Sachdev
August 15, 2009

Tribune Co. creditors have asked the bankruptcy court for permission to hire special counsel to further investigate the $8.2 billion leveraged buyout of the Chicago-based media company engineered by real estate magnate Sam Zell.

The inquiry is common practice when a bankruptcy follows closely on the heels of an LBO, said bankruptcy experts. Zell closed the transaction that took Tribune Co. private in December 2007. The new debt obligations were too big a burden amid rapidly declining advertising revenues, sending the company, parent of the Chicago Tribune, into bankruptcy in December 2008.

Creditors have not filed a lawsuit seeking to recover money against parties that were involved in the going-private transaction, which established an employee stock ownership plan to become majority owner of the company. But the court filing on Thursday signaled that they are considering pursuing litigation, said Chicago-based restructuring expert Bill Brandt.

With creditors likely to collect only a small percentage of their debts, “it is an absolute certainty that creditors look to the realm of lawsuits to try and get more money out,” Brandt added.

There is precedent for challenging LBOs in bankruptcy court on grounds of “fraudulent conveyance.” Such suits argue that LBOs have left companies with too much debt to operate and benefited former executives, bankers, lawyers and financial advisers at the creditors’ expense. There’s usually not a question of fraud with the buyout, but rather the issue of whether the transaction was commercially reasonable.

snip

[stephenjohnbanker]

If I ever need an investigative reporter, you are it!

Good job, and thanks.

[MovementConservative]

If I remember right, Zell is ‘only’ personally on the hook for some $300 mil. I guess that’s long gone.

[abb]

Yes, we’ve been discussing that very thing upthread. Some of the lenders are going to try and recover more, though. See post 45.

[MovementConservative]

Most analysts think it(commercial real estate) will soon be in worse shape than the housing market -- or even newspapers, for that matter.

It's pretty obvious that malls and office space are emptying. The market will correct that if allowed to without government interference. The owners will have to lower the rent they get per square foot to something that the market will bear. Of course I have little confidence that the Dems will allow this to happen.