NY Times: Chi Trib looks to stave off Bankruptcy!

by Ivy Walls on Dec 7, 2008 5:56 PM CST

Wow, this has implications all over the place. Zell's big financial gamble which I thought was quite risky at a time when I knew the private equity market was already seeking safe harbors, the Cubs and the media corporate houses themselves. In CO the venerable Rocky Mtn News has been publicly placed up for sale or will be shut down in January. In CO Springs the local Libertarian oriented Gazette is bleeding subscribers and revenues where they can't keep a publisher/editor for more than a year going back to the mid '90's.

Anyway here is the NY Times Alert:

Breaking News Alert
The New York Times
Sunday, December 7, 2008 -- 6:11 PM ET
-----
 
Tribune Tries to Stave Off Bankruptcy Filing
 
The newspaper company has hired bankruptcy advisers in an
effort to stave off a potential bankruptcy filing, people
briefed on the matter said.

This is a FanPost and does not necessarily reflect the views of SB Nation or Al Yellon, managing editor (unless it's a FanPost posted by Al). FanPost opinions are valued expressions of opinion by passionate and knowledgeable baseball fans.

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Here is a little bit more info regarding from the WSJ...

I am not sure if a link will work if you dont have a subscription so here are the interesting parts;

Tribune Prepares for Bankruptcy Filing

By DENNIS K. BERMAN, SHIRA OVIDE and MATTHEW KARNITSCHNIG
Tribune Co. is preparing for a possible bankruptcy-protection filing as soon as this week, according to people familiar with the matter, opening a new front of trouble for the newspaper industry.

As Tribune continues discussions with its lenders to rework its debt load, the newspaper-and-television concern in recent days has hired Lazard Ltd. as its financial adviser and a legal counsel for a possible trip through bankruptcy court, according to people familiar with the matter.

snip

Tribune has been on wobbly footing since last December, when real-estate mogul Sam Zell led a debt-backed deal to take the company private. Tribune so far has stayed ahead of its $12 billion in borrowings with the help of asset sales, but now dwindling profits are tightening the noose. The company’s cash flow may not be enough to cover nearly $1 billion in interest payments this year, and Tribune owes a $512 million debt payment in June.

I would suspect this is why Crane said the team would be sold by spring training earlier this week. Selling the Cubs has to be the one of the quickest ways for them to meet the June debt payment.

New sig currently under construction

by JB 23 on Dec 7, 2008 6:14 PM CST reply actions

But...

… if they file for bankruptcy, they don’t have to meet that deadline, do they?

"That's my opinion and if you don't like it, well, I have others." ~ Groucho Marx

by Al Yellon on Dec 7, 2008 10:29 PM CST up reply actions

I just received the NY Times alert myself...

This is an interesting, though not totally unexpected development. In the the NY Times article itself, the legal firm they hired is identified as Sidley Austin. Considering the two firms they’ve hired as advisors, they’re have some serious problems that need to solved faster than the usual glacier pace of most large corporations.

"Pinky, are you pondering what I'm pondering?"--The Brain

by brook on Dec 7, 2008 6:27 PM CST reply actions

I wonder about the impact this will have on team payroll.

If Zell is forced to sell the team quickly, he is may have to settle for a little less, perhaps leaving the new owner with a little more cash on hand. On the other hand, it might force the new owner into having to scramble for funds, leaving them short of cash right after the transaction. Either way, I would guess a quick sale will force Hendry to leave the payroll numbers in pencil for a bit longer. And I’ll go out on a limb and say that the Peavy deal doesn’t go down before the winning bid is announced.

"Well, we're out of cake! We only had three bits and we didn't expect such a rush! So what do you want?"
"What, so my choice is 'or death?' Well, then I'll have the chicken, please."
--Eddie Izzard

by znohitter on Dec 7, 2008 6:43 PM CST reply actions

Keep in mind...

… that when large corporations file for bankruptcy, it does NOT mean they stop operations, in general. Consider United Airlines, which operated for two years in bankruptcy. They did shed some payroll, but mainly it means the creditors don’t get paid back right away, if at all.

And yes, it could mean that the bankruptcy court could order the team sold, at a price that Sam Zell doesn’t control.

"That's my opinion and if you don't like it, well, I have others." ~ Groucho Marx

by Al Yellon on Dec 7, 2008 10:30 PM CST up reply actions

Bankruptcy not reorganization

is more likely. In the past companies filed Chapter 11 which allowed them to rearrange debt and was approved by creditors and stockholders. Currently credit is unavailable. Ask GM. Trib has a negative cash flow and only meets obligations from sale of assets. Their pulishing revenue is down 13% and headed south.

Looking at their balance sheet shows they seem to have lost an additional $100M in credit derivatives and they’ve used $225M of a $300M revolving line. In the end the employees who got severance packages will probably be the only winners.

And unless the Cubs sale can be accomplished tax free, there will also be a huge IRS tax bill.

If you like Selig's handling of the steroid issue, you'll love his choice for next Cub owner.

by tharr on Dec 8, 2008 1:30 AM CST up reply actions

That tax bill is why Zell is keeping a percentage of the team.

You don’t think they can file a Chapter 11?

"That's my opinion and if you don't like it, well, I have others." ~ Groucho Marx

by Al Yellon on Dec 8, 2008 4:02 AM CST up reply actions

I believe that is the case.

However, if IIRC from things I’ve read about the terms of the sale as Zell wants them, the IRS may scrutinize the sale just to see if there’s some loophole that would allow them to collect some taxes.

I wonder if the possibilty that the Trib Co. might file for bankruptcy will force Zell to sell the Cubs by more conventional terms because the money is needed now? I realize Zell wants to avoid a large tax bill, but he might not have much of choice in the matter.

"Pinky, are you pondering what I'm pondering?"--The Brain

by brook on Dec 8, 2008 6:29 AM CST up reply actions

I think that a bankruptcy judge can remove some tax liability.

Bankruptcy judges have a wide latitude in distributing assets among stakeholders. He/she might be able to reduce the portion that goes to the IRS.

"I've never complained about it. I'm thankful to have a jersey." Mark DeRosa, 22 Aug 2007

by DeRoMyHero on Dec 8, 2008 12:34 PM CST up reply actions

Only God

can remove a tax liability. Actually, I don’t believe the judge can impose limitations. He can instruct the Trustee to request a favorable adjustment, but that’s as far as he can go, IMHO. OTOH, can you see the IRS waiting for their money to the advantage of other creditors? Before you answer, take a deep breath and picture an IRS agent with a smily face.

If you like Selig's handling of the steroid issue, you'll love his choice for next Cub owner.

by tharr on Dec 8, 2008 4:39 PM CST up reply actions

They can file

Chapter 11. But if the creditors don’t forsee Trib getting a loan to continue their operations, there is no sense to it. No one will extend credit including suppliers, employees won’t be paid, etc. That’s why I suspect it will be either complete bankruptcy or nothing. And I believe that Zell is attempting to maintain 5% to avoid the large tax bill. However, if they choose bankruptcy, all assets will be sold and the 5% holdback won’t be an option.

If you like Selig's handling of the steroid issue, you'll love his choice for next Cub owner.

by tharr on Dec 8, 2008 4:33 PM CST up reply actions

Solution

The solution is not to raise ticket prices.

It is to get a bailout from the government.

Bill Murray was prophetic in asking about this at the presidential debate.

by 08Cubs on Dec 7, 2008 8:12 PM CST reply actions

this team better be quickly sold...

i cant understanbd how we can take on salary right now

"I played with one of the best pitchers in history, Greg Maddux," Zambrano said"

by fischisgod on Dec 7, 2008 10:32 PM CST reply actions

Does anybody get why the Trib did NOT sell the Cubs by now ?

They desperately needed the money and now the will get a lot less. I imagine this will slow the sale as they would
need court approval to sell now I assume.

"I am not ashamed to say I love Greg Maddux" - Jim Hendry

by Doggie Stalker on Dec 8, 2008 1:12 PM CST reply actions

in theory, as the cubs and wrigley field have not filed a bankruptcy petition, court approval is not necessary so long as it's structured as an asset sale and not a stock sale.

however, in practice, you are correct that there is likely to be some measure of bankruptcy court approval, if only because of the large dollar size of the cubs/wrigley asset. plus, there may be reasons that a sale would be structured as a stock sale and since the stock is directly owned by the tribune co., that would require heightened scrutiny from the court.

a-rod is a traitor.

by larry on Dec 8, 2008 1:21 PM CST up reply actions

They filed...

http://www.msnbc.msn.com/id/28101775/

by coral on Dec 8, 2008 1:40 PM CST reply actions

Here's the legal explanation for why the Cubs are excluded in the filing

From Darren Rovel’s blog:

Rubin told me that a parent corporation can file for bankruptcy without the subsidiary filing. The point of doing this is to make it easier to sell the Cubs without all the rules associated with the bankruptcy court, including timely filings of financial information. Another bankruptcy lawyer friend of mine told me that it would also allow the Cubs employees, and anyone associated with dealing with the Cubs, to better operate on a “business as usual” basis.

This all does not mean, however, that the Cubs sale will be free from everything that goes on with the bankruptcy because the creditors will still get the proceeds from the sale of the team.

I love to play baseball. I'm a baseball player. I've always been a baseball player. I'm still a baseball player. That's who I am. - Ryne Sandberg

by Bill Potter on Dec 8, 2008 5:13 PM CST reply actions