NEWSLETTER
It’s no secret that the Tribune Company’s Sam Zell has been a difficult man to deal with throughout the sale of the Chicago Cubs. Heck, I probably would be, too: he bought a company – and improvident purchase, to be sure – that almost immediately went belly up, and he’s now trying to sell one of the only pieces of the company that can pull in a premium.
So he’s squeezing not only for every last dime, but also to ensure the deal is structured in the perfect way. It’s slowing down the process.
But Zell might be out of that process soon.
Chicago-based Tribune Co. and its creditors are in the early stages of negotiating a plan of reorganization in U.S. Bankruptcy Court that sources said likely would transfer control of the troubled media conglomerate from Chicago billionaire Sam Zell to a group of large banks and investors that holds $8.6 billion in senior debt. chicagotribune.com.
Those creditors are more likely to just want to get the deal done – they don’t care in the least how the deal is structured. They just want their money.
Some more particulars on the restructuring of Zell’s ownership interest and role:
The central logic behind the debt-for-equity swap is that Tribune Co. can no longer afford the nearly $13 billion in debt that grew out of Zell’s $8.2 billion deal to take the company private in 2007. With advertising revenue in decline and the company’s cash flow deflated, the company must shrink its obligations to a more sustainable level while giving creditors enough potential value in return that they agree to the cuts without a fight.
The senior creditors — a group that includes large banks such as JPMorgan Chase and Citigroup, as well as institutional investors and funds such as Oaktree Capital Management and Angelo, Gordon & Co. — have claims worth $8.6 billion. But the senior debt is trading on the open market for about 30 cents on the dollar, suggesting the company may be worth somewhat less than $3 billion.
Note that JPMorgan Chase and Citigroup are two of Tom Ricketts’ major lenders in his bid to buy the Cubs. Read: they have an additional incentive to get the deal done.
So all told, this would be great news for getting the sale done.
