Sam Zell Must Face Tribune Employees’ Lawsuit Over Pension Plan

Sam Zell, the real estate investor who took the Chicago-based Tribune Co. private in an $8.3 billion stock buyback two years ago, must face an employee lawsuit claiming he knowingly violated federal pension laws. [Click for MORE] Sphere: Related Content

Sam Zell: No Newspapers Can Survive

When posed with the question of whether or not he regrets his Tribune deal, Sam Zell admitted, "It's certainly the most amount of money I ever lost in a single deal."

He goes on to say that the entire newspaper industry, including Tribune, has seen a crash in revenue, and that "nobody can survive." -- Silicon Alley Insider

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Tribune Bondholders Fault Zell Takeover

Disgruntled Tribune Co. bondholders have asked a U.S. bankruptcy judge to let them investigate Sam Zell's 2007 buyout of the newspaper-and-television chain in an effort to derail a plan that would hand the company over to its banks.

The filing, made late Wednesday, calls the $8.2 billion transaction a "fraudulent conveyance" that left Tribune insolvent from the onset of the 2007 deal. It accuses senior lenders led by J.P. Morgan Chase & Co. of completing a leveraged buyout they should have known would push the company into bankruptcy.

"Fraudulent conveyance" is a legal term most often used in bankruptcy court, in which creditors allege a company has used assets in a way unfair to creditors. In the context of leveraged buyouts, creditors can argue a deal loaded up a company with too much debt, leaving it undercapitalized and unable to meet future obligations. [Click for MORE]

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Who Gets to Grow Up to Be Citizen Kane?

Simon Dumenco of AdAge writes:

I've been thinking about the life cycle of media moguls -- and the future of the very idea of the media mogul -- given all the recent rumors surrounding relative spring chicken Sam Zell, chief of the Tribune Co., the newspaper and broadcasting conglomerate. Just 67 and still invariably described as a "motorcycle-riding billionaire," Zell, having massively botched his attempt at media moguldom since taking control of Tribune in 2007, is said to be on his way out. Either forced out by creditors (if you believe the Chicago Sun-Times) or reduced to simply abandoning the wreckage of his failed investment (if you believe Murdoch's New York Post).

The big man walks away a small man -- diminished in the eyes of history. He could have shuffled off this mortal coil with his legend as a real-estate genius intact, but instead he'll mostly be remembered for helping to drive the Chicago Tribune and the Los Angeles Times and his other papers more quickly into the ground. Surely he'll be the last big man to try to become even bigger through media moguldom. [Click for MORE]

• How Zell botched Cubs deal

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Zell's ESOP Fable

Tribune Employees Are Shortchanged

Tribune's short-lived experiment with employee ownership is coming to an end.

While Tribune is still navigating the bankruptcy process, the creditors are unlikely to keep the employee stock ownership plan, leaving workers with worthless shares, a source involved in the negotiations said.

In 2007, real-estate tycoon Sam Zell used the stock plan, called an ESOP, to gain tax benefits on the $8.2 billion buyout of the struggling company.

The plan made employees official owners with 100 percent of the equity, but they have no say over management or the board. In the bankruptcy, they are viewed as common shareholders with less claim than other creditors. [Click for MORE]

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Operating Management Will Stay With TribCo

Responding to recent media reports he called "inaccurate," a top Tribune Co. executive sent a note to the company's employees Thursday saying that Tribune Co.'s current "operating management" intends to stay at the company following the Chicago media conglomerate's emergence from bankruptcy court.

Randy Michaels, Tribune's chief operating officer, also termed "absurd" suggestions in the reports that the company might be liquidated as part of its Chapter 11 plan of reorganization. [Click for MORE]
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Zell Gives Up

Report: Ready to leave TribCo.

The New York Post is reporting that Zell is "ready to walk away" from the Tribune Company, ending one of the most inglorious chapters of newspaper ownership in Chicago history.

And just to make sure Zell has gotten the message from angry creditors already reportedly organizing a putsch, those lenders have now asked a bankruptcy court for permission to investigate Zell's kinky and controversial $8.2 billion takeover of the media giant,according to the Sun-Times. [Click for MORE]

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Zell May Give Up Claim to Buy Tribune Stake

Steve Greenberg via LA Observed

Tribune Co. chief executive Sam Zell is close to giving up his claims to buy a 40 percent stake in the company, the New York Post said, citing a source familiar with the matter.

Zell looks ready to give up a warrant, which he negotiated as part of his $8.2 billion deal to take the company private in 2007, according to the paper.

The warrant gives Zell the right to buy about 40 percent of the company for $500 million and is the basis of his control over Tribune Co, the paper said. [Click for MORE]

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Tribune Co. Creditors Seek Special Counsel to Probe Buyout, Could Sue to Recover Money

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. [Click for MORE] Sphere: Related Content

A Textbook Bad Manager Gets Ready to Go

From Workforce Management:

[Sam] Zell is the foul-mouthed CEO of Tribune Co., the big media company that owns not only television and radio stations but also big newspapers including the Los Angeles Times, Chicago Tribune and Baltimore Sun. He was in over his head from the moment he cut the deal to take control of Tribune, and his over-the-top hubris, chronic arrogance and terribly shortsighted decision-making (by both Zell and his management minions) have helped push Tribune into Chapter 11 bankruptcy.

It’s a bad management trifecta that led me to award Zell with the 2009 Workforce Management Stupidus Maximus Award, given annually to the “most ignorant, shortsighted and dumb workforce management practice of the year.”

Well, we may be starting to see the end of Sam Zell, at least as the guy controlling Tribune. The Chicago Sun-Times reports that “Sam Zell’s days as a media titan in Chicago are nearly over. … Eight months after [Tribune’s bankruptcy] 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.” [Click for MORE]

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Zell Headed Out?

From LAobserved.com/biz:

Chicago Sun-Times is reporting that Tribune Co. creditors apparently have had enough of CEO Sam Zell and are working on a reorganization plan that would essentially break up the company and get him out. Story lacks detail and the process is still ongoing, but there have been rumblings in recent weeks that the creditors want out. Before they can file a reorganization plan, however, the company must be given a chance to submit its own plan. A bankruptcy judge has given Tribune until Nov. 30 to do so.

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.

[CUT]

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.

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It's time for Zell to sell Tribune Co.

Fair or not, Zell has become the poster child for newspapers' ills. Tribune's financial condition keeps getting worse and worse. The journalists employed at his most prominent newspapers, the Los Angeles Times and the Chicago Tribune, gamely fight the good fight against their competitors at the New York Times, The Wall Street Journal and the Washington Post .

But under Zell's stewardship, the Tribune and the L.A. Times are shadows of what they were in fat times. [Click for MORE]

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Storms Still Ahead for the Chicago Tribune

For the Chicago Tribune, Tuesday Dec. 10, 2008 was a fateful day.

On that day, the newspaper published its in-depth investigation of the Gov. Rod R. Blagojevich scandal; two days earlier, its parent company, Tribune Co., filed for Chapter 11 bankruptcy.

“That day said the business model is broken,” editor Gerould W. Kern said at a May 21 panel of industry leaders titled “Make Media Matter.”

Before and since December, the newspaper suffered numerous layoffs, lower print circulation and a $13 billion debt load which real estate mogul Sam Zell took on when he purchased the company in April 2007. Zell invested $315 million in equity in the company in an $8.2 billion dollar buyout.

“Reporters are losing their jobs and people are getting lower quality,” said Rick Edmonds, media business analyst for the Poynter Institute, a nonprofit industry education resource. “It’s a lot to do with helping Sam Zell pay the debt, which he isn’t able to do completely anyway.”

Not all newspapers are saddled with debt. But the Chicago Tribune has plenty of company in the pool of struggling papers trying to conquer the Internet and other new technologies, while seeking to overcome economic challenges and attract younger audiences. Experts fear the Tribune’s financial trouble is negatively affecting the credibility of the paper, and with advertising revenues falling, the Tribune must search for other revenue streams and ways to deliver its content. [Click for MORE] Sphere: Related Content

Sam Zell Might Lose Control of Tribune

From LAobserved.com:

Intriguing story out of the Chicago Tribune (via Romenesko) says that negotiations with big creditors of the bankrupt Tribune Company could lead to chairman Sam Zell losing his role. Details are still in flux, apparently, but the story says:

Bankruptcy experts said the plan's outline raises questions about whether the senior lender group would want to retain Zell and his management team or seek new leadership for the company. It also poses the question of whether Zell would want to stay without a large ongoing stake in the company.

Sources close to both the creditors and the company said it is too early to make such decisions and Tribune management continues to control the process because it currently has the exclusive right to propose whatever reorganization plan it wishes. But Zell's team has indicated that it wants to work toward a consensual plan with the company's creditors, which means issues such as who manages the company and whether those managers are given equity as part of an incentive package will be negotiated over time, experts said.

"It completely depends on whether the new owners see value in keeping Zell," said Douglas Baird, a corporate reorganization specialist at the University of Chicago Law School. "They have to decide: Is the person at the helm when the company went into the storm the most able person to steer it out?"

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'Zell May Be a Genius in Other Lines of Work, But He Is an Idiot in Terms of Journalism'

Sam Zell, who made his fortune in real estate, engineered a takeover of the Tribune Co. in 2007, a deal that saddled his new acquisition with about $13 billion in debt.

I could wear my underwear over my trousers and Tribune would think that’s innovation. Everybody else would think I was wacko." Michael Waller, former publisher of The Baltimore Sun

“Zell may be a genius in other lines of work, but he is an idiot in terms of journalism,” John Carroll, former editor of the Los Angeles Times, said.

Michael E. Waller, a former publisher of The Baltimore Sun, also had choice words for Tribune’s business practices.

“Tribune management confuses innovation with idiocy,” he said. “I could wear my underwear over my trousers and Tribune would think that’s innovation. Everybody else would think I was wacko.”

Waller is not optimistic about the future of some newspaper companies, especially Tribune.

“If this ownership continues its ways, it will be forced to liquidate,” he said.

But he is not willing to give up on the industry overall.

“The real truth is that about 80 percent of the daily newspapers in this country are making money, and most of the real problems are in the big city papers,” he said. “That’s not a dying industry.

“Some of the big papers are going to die because they are being mismanaged, but a lot of newspapers will be fine.” [Click for MORE] Sphere: Related Content

Zell Admits ‘Mistake’ in Tribune Co. Purchase

The company is looking at all its options


From Crain's ChicagoBusiness.com:

Sam Zell admits that taking over Tribune Co. hasn’t gone according to plan and was a “mistake.”

“The definition if you bought something and it’s now worth a great deal less, you made a mistake,” he told Bloomberg Television [VIDEO at 10:11 and 14:30] on Wednesday. “And I’m more than willing to say I made a mistake. I was too optimistic in terms of the newspaper’s ability to preserve its position.”

The Chicago billionaire, who made his fortune from commercial real estate, was instrumental in taking the parent of the Chicago Tribune and Los Angeles Times private through a complex deal that saddled it with $13 billion in debt. Tribune Co. filed for Chapter 11 bankruptcy protection in December, a move Mr. Zell said in Wednesday’s interview was necessary to “stop the bleeding and preserve a great company.”

The process that Mr. Zell used to take Tribune private caught the attention recently of the U.S. Department of Labor, which last month subpoenaed the company for documents related to its Employees Stock Ownership Plan, now the sole owner of Tribune Co.

Mr. Zell said he was unprepared for how quickly and steeply the newspaper industry has deteriorated.

“We underwrote the Tribune (deal) based on the fact that over the previous five years, we had seen an erosion of about 3%,” he told Bloomberg; he didn’t specify the losses to which he was referring. But in the months before filing for bankruptcy protection, the company saw a 25% decline, losses that “in a leverage business are just insurmountable.” He called the figure “significantly larger” than expected.

He said the company is looking at all its options, but he ruled out the possibility of a merger.

“That’s like asking someone in another business if they want to get vaccinated with a live virus,” he said. “I don’t think there’s a long list of people who want to buy a newspaper company today.”

• Trib to pare newsroom 20%
• Sam Zell on Tribune Co. acquisition: 'I made a mistake, I was too optimistic'
• Billionaire Zell Says ‘I Made a Mistake’ in Purchasing Tribune

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Signs Are That Zell Will Eventually Collapse L.A.'s Iconic Newspaper

By Sue Laris
Downtown News

The recent announcement that the Los Angeles Times is cutting 300 more jobs, 70 of them in the newsroom, was a shock, but it shouldn't have been. We should be experiencing grief, not surprise. Outrage is another apt emotion.

It is no longer advisable to turn away from the brutal carnage in plain view, no longer possible to believe there will be any tolerable outcome from the ongoing reconfiguring of the Times under the current ownership. The truth must be faced before it is too late. The bleeding is not going to cease. It is going to worsen. And that result is bad for all of us, even those who despise the Times. [Click for MORE]

> LA Times unionized pressroom employees get WARN layoff notice
> Deseret Management hires former LA Times publisher Willes Sphere: Related Content

Coal

From Los Angeles Downtown News Sphere: Related Content

It's All About Reputation Now for Zell

At this point, the only remaining incentive for Sam Zell to slog through a Chapter 11 reorganization likely to last a year or more appears to be the chance to repair his reputation as a businessman. Long known as a canny dealmaker in the real estate business, Zell had an opportunity with Tribune to prove himself as a corporate strategist. [Click for MORE]

> L.A. Times journalists respond to Tribune's hard times by working hard
> The case for and against Sam Zel
> How Zell screwed up on Blagojevich
> MediaNews Sees Bad Timing on Newspapers, Not Bad Bets
> Newspapers' voices changed once, and might again Sphere: Related Content

Tribune Subpoenaed in Blagojevich Shakedown

Tribune Co. was subpoenaed by federal authorities in relation to corruption charges levied on Tuesday against Gov. Rod Blagojevich, the Chicago Tribune reported.

The newspaper said that its parent company was asked to provide documents that would relate to allegations that Blagojevich and John Harris, his chief of staff, conspired to get members of the Chicago Tribune editorial board fired in exchange for help in selling the company-owned Wrigley Field. [Click for MORE]

> Tribune's Zell says FBI contacted him in government case
> Blagojevich owes Winston & Strawn $500K: WSJ
> Delaware Judge Authorizes Tribune to Pay $74 Million Owed to Employees Sphere: Related Content