Wednesday, August 19, 2009

Report: Tribune Employees To Get Shortchanged

Los Angeles Business from bizjournals

Creditors who seek to oust Tribune CEO Sam Zell probably won’t keep the employee stock ownership plan -- a move that will leave employees with worthless shares, the New York Post reports Wednesday.

The Post cites a source involved in creditor negotiations.

In 2007, Zell used the stock plan to gain tax benefits on the $8.2 billion Tribune buyout.

Under the plan, workers have 100 percent ownership of the company but no say on management or the board. Bankruptcy views them as shareholders.

On Tuesday, the Post reported that Tribune is giving up on an attempt to buy a large stake in the company. A report surfaced Friday that the real estate tycoon could be ousted as part of reorganization plan put forth by creditors.

Tribune, which Zell privatized in 2007, operates newspapers and TV stations including the Los Angeles Times, Chicao Tribune, KTLA, WPIX, and WGN.

Tribune entered bankruptcy protection in December.

Friday’s report says that the creditors Zell owes payments to plan to stage a takeover of their own and sell off the company's newspapers and broadcast stations as they see fit.

Zell owes these creditors $8.6 billion, and those creditors are reportedly becoming impatient with him. But the creditors must wait until Nov. 30 before they can file a plan since Zell was granted an extension on his own Tribune reorganization. That extension was granted on Aug. 10.

Reports came out in June that stated Zell would lose Tribune to the same group of investors.

That report stated that "the plan centers on a debt-for-equity swap that probably would give the senior lenders a large majority ownership stake in the reorganized company.

Reports: IRS Auditing Tribune ESOP

The Internal Revenue Service is auditing the Employee Stock Ownership Plan that was a key component of Sam Zell's purchase of the Tribune Co., according to media reports.

Under Tribune's ESOP, workers have 100 percent ownership of the company but no say on management or the board.

According to the reports, an IRS agent in Wisconsin is looking at the ESOP's $250 million purchase of new shares issued by Tribune. The question regarding the purchase is whether or not the purchase would be considered to the benefit of Tribune employees.

Should the purchase be considered to be of benefit, it would be classified as tax exempt. If not, Tribune would potentially have to pay corporate income taxes and excise taxes, the reports say.

The IRS agent filed a statement regarding the investigation with the U.S. Bankruptcy Court, the reports say. Tribune is currently under Chapter 11 bankruptcy protection.


Former Tribune Exec Dennis FitzSimons Joins Media General Board

Media General Inc., the parent company of The Tampa Tribune and WFLA-Channel 8, has expanded its board of directors to 10 members to make room for its newest member: former Chicago Tribune executive Dennis FitzSimons.

“Dennis FitzSimons is a proven and innovative business leader who led a premier media company through times of outstanding growth and tough challenges,” said Marshall N. Morton, Media General’s president and chief executive officer, in a filing with the Securities and Exchange Commission. “His industry knowledge and experience with the changing media landscape and the synergies of print, broadcast and online platforms will bring a valuable perspective to the Media General board’s deliberations.”

FitzSimons was the chairman, chief executive officer and president of Tribune Co. until December 2007 after completing the sale of the company to Sam Zell for $8.2 billion, ending a 25-year relationship with the company. FitzSimons is said to have earned $41 million in that deal.

Getting his start in the company’s broadcast division, FitzSimons was named an executive vice president at Tribune in January 2000 and earned an election to Tribune’s board of directors that same year, according to the SEC filing. He would become president and chief operating officer in July 2001 and then elevated to chief executive officer in January 2003.

Tribune Co. filed for bankruptcy in December 2008, caused mostly by the media company’s efforts to go private a year earlier.

Outside directors to the Media General board receive an annual retainer of $116,000 for all scheduled meetings as well as an additional $1,750 for each unscheduled board meeting and each committee meeting attended beyond the two included in the retainer, according to SEC filings. Half of that compensation is issued in deferred Class A stock, and each director can elect to receive the other half either in cash, deferred stock units, or split evenly in cash and deferred stock.

Media General (NYSE: MEG) reported a loss of $21.3 million, or 96 cents per share, in the most recent quarter ended March 29, deeper than a $20.3 million, or 92 cents per share loss, the year before. Revenue fell from $194.5 million in the first quarter of 2008 to $159.5 million in the most recent quarter.

Media General shares were trading at $2.06 just after 4 p.m. Wednesday, up more than 7 percent from their previous-day close of $1.92. The media company’s shares have traded between $1.25 and $27.18 over the past year.

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