Wednesday, October 28, 2009

Sam Zell: 'With some reasonable luck,' Tribune Co. will exit bankruptcy in early 2010

By Phil Rosenthal

Saying his investment in Chicago Tribune parent Tribune Co. represents "certainly the most amount of money I've ever lost in a single deal" billionaire Sam Zell said Wednesday that he no longer believes the media company will emerge from Chapter 11 bankruptcy before the end of this year."With some reasonable luck, I think it'll be out sometime by the end of the first quarter (of 2010)," Zell, Tribune Co.'s chairman and chief executive, told Bloomberg Television. "I've been involved in a lot of bankruptcies in my life -- most of the time as the buyer of the debt as opposed to the debtor in possession. Bankruptcies, by definition, are very frustrating, and they will continue to be."

Tribune Co. filed for Chapter 11 protection last December because it was struggling to manage the debt from the deal Zell engineered to take the company private a year earlier.

The heavily leveraged transaction for $8.2 billion saddled the Tribune Co. with $13 billion in debt just as the bottom fell out of the advertising market.

The original deal gave Zell a $90 million warrant that gave him the right to buy about 40 percent of the company for $500 million and has been the basis of his control of the company. "I don't think that that structure and that original plan will survive in bankruptcy," Zell said in the interview.

Zell also holds a $250 million note representing a loan he made to Tribune Co. as part of the going-private transaction, but that note is near the bottom of the hierarchy of claims in Tribune Co.'s bankruptcy case and is seen as unlikely to retain any value during the capital reorganization.

With regard to the allegation by some bond holders that the Tribune Co. leverage buyout should have been seen as doomed from the start and therefore represented "fraudulent conveyance," Zell said it's a common argument in bankruptcy cases."Most of the junior creditors in most of the scenarios will allege a fraudulent conveyance," he said. "In the end, it's very difficult to prove, number one. Number two, in this particular case, I don't think it's valid. But ultimately it becomes a basis for negotiations.

"Zell said he was "very happy for the Ricketts family," which acquired control of the Chicago Cubs from Tribune a day earlier. The transaction for the Cubs, who haven't won a World Series in 1908, has been valued at $845 million."I think the team should be owned by somebody who is local, somebody who is really passionate about baseball," Zell said. "I happen to be local. I'm not passionate about baseball. So I wish them all of the best of luck. And maybe we'll break the 101-year curse."

In an April interview with Bloomberg, Zell said that the Tribune Co. deal was, by definition, "a mistake" in that it lost money.

He was asked yet again Wednesday if he regretted the deal and would do it again if he could go back in time. "You can't look back," Zell said. "As I've said oftentimes, my head only work straight. So the answer is: If we made a mistake, or it didn't work it, it didn't work. ... and in this particular case, there was such a crash in the revenue side of the entire newspaper business. As you see by the other companies, nobody could survive it."

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