Sam Zell, the corporate turnaround whiz and real estate giant whose leveraged takeover of the Tribune Co. has gone to hell – and bankruptcy – reportedly is about to fall victim to a tit-for-tat takeover by his creditors.
The Chicago Sun-Times reported Friday that eight months after Zell filed for Chapter 11 bankruptcy, creditors – including investment banks that are owed $8.6 billion of a total $13 billion debt – are working on their own reorganization that will shove Zell out the door.
The newspaper, rival of the Zell-owned Chicago Tribune, attributed the information to two unnamed sources familiar with the plan. “The banks will be in charge,” one said. But the creditors will have to wait at least until Nov. 30 to file their plan after a bankruptcy judge this week gave Zell until then to be the first to file his own reorganization strategy.
Sam Zell
The Sun-Times also quoted another turnaround pro, who’s not involved in the Tribune case, as saying Zell needs an “honorable exit” from the fiasco to save his reputation, because he may need the help of investment banks in future deals.
William Brandt Jr., president of Chicago-based Development Specialists Inc., said, “This was a textbook case of a leverage buyout gone bad. These were imbeciles who had no idea what they were doing.”
After taking the Tribune Co. private in late 2007, Zell failed to move quickly enough to sell off major assets, including Long Island-based Newsday, which netted “only” $650 million, Brandt said. And sale of the Tribune-owned Chicago Cubs has been delayed for months while Zell has tried to sell the team’s home stadium, Wrigley Field, in a separate deal.
Gary Weitman, speaking for the Tribune Co., said last week that it’s too early to speculate on a change of ownership. “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,” Weitman said. “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.”
In the midst of the tangled bankruptcy maneuverings, Zell’s company aped the actions of investment banks and other recipients of federal bailouts by asking court approval of a plan to pay bonuses of nearly $70 million to its top executives and core managers.
That raised tempers and a formal objection by The Newspaper Guild, representing editorial employees at the Baltimore Sun and other Tribune-owned newspapers. On Tuesday, according to the Associated Press, a federal bankruptcy judge ruled that the Guild should have access to details of the bonus plan.
Tribune Co. also owns the Los Angeles Times, The Hartford Courant, other big dailies and 23 TV stations.
The Sun-Times noted that “Tribune debt recently traded for about 7 cents on the dollar, meaning investors think a lottery ticket is just as likely to pay off.”
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