Workers Pay for Debacle at Tribune

Discussion in 'Economy' started by sealybobo, Dec 9, 2008.

  1. sealybobo
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    sealybobo Diamond Member

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    In December 2007, Zell closed on the $8.2 billion acquisition of the Tribune Co., putting in $315 million of his own money and borrowing much of the rest. Make no mistake about it, The Tribune Company was a classic dumb money play, and not just because it’s main assets were declining newspapers
    Why Sam Zell’s Tribune deal went so bad, so fast | Newsweek Voices - Daniel Gross | Newsweek.com


    No where in Newsweek’s article do they mention employee pension’s are at stake.

    You have to read that in the NY Times.

    http://www.nytimes.com/2008/12/09/business/media/09sorkin.html?ref=media
     
  2. sealybobo
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    sealybobo Diamond Member

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    Mr. Zell literally mortgaged the future of Tribune’s employees to pursue what one analyst, Jack Newman, at the time called “a childhood fantasy.”

    Mr. Zell financed much of his deal’s $13 billion of debt by borrowing against part of the future of his employees’ pension plan and taking a huge tax advantage. Tribune employees ended up with equity, and now they will probably be left with very little.

    As Mr. Newman, an analyst at CreditSights, explained at the time: “If there is a problem with the company, most of the risk is on the employees, as Zell will not own Tribune shares.” He continued: “The cash will come from the sweat equity of the employees of Tribune.”

    It is unclear how much Zell will lose, but one thing is clear: when creditors get in line, he gets to stand ahead of the employees.

    it is worth remembering all the people who mismanaged the company beforehand and helped orchestrate this ill-fated deal — and made a lot of money in the process. They include members of the Tribune board, the company’s management and the bankers who walked away with millions of dollars for financing and advising on a transaction that many of them knew, or should have known, could end in ruin. (sound familiar? sub prime lenders)

    It was Tribune’s board that sold the company to Mr. Zell — and allowed him to use the employee’s pension plan to do so. Despite early resistance, Dennis J. FitzSimons, then the company’s chief executive, backed the plan. He was paid about $17.7 million in severance and other payments. The sale also bought all the shares he owned — $23.8 million worth. The day he left, he said in a note to employees that “completing this ‘going private’ transaction is a great outcome for our shareholders, employees and customers.”

    (WE SHOULD TAKE BACK THAT MONEY FITZSIMONDS GOT)

    Tribune’s board was advised by a group of bankers from Citigroup and Merrill Lynch, which walked off with $35.8 million and $37 million, respectively. But those banks played both sides of the deal: they also lent Mr. Zell the money to buy the company. For that, they shared an additional $47 million pot of fees with several other banks, according to Thomson Reuters. And then there was Morgan Stanley, which wrote a “fairness opinion” blessing the deal, for which it was paid a $7.5 million fee (plus an additional $2.5 million advisory fee).

    On top of that, a firm called the Valuation Research Corporation wrote a “solvency opinion” suggesting that Tribune could meet its debt covenants. Thomson Reuters, which tracks fees, estimates V.R.C. was paid $1 million for that opinion. V.R.C. was so enamored with its role that it put out a press release.

    (ARE WE ALL SUCKERS? DO WE NOT SEE THE PATERN HERE?)

    But what about those employees? They had no seat at the table when the company’s own board let Mr. Zell use part of its future pension plan in exchange for $34 a share.

    Mr. Newman, the analyst who predicted the trouble, said in an interview on Monday, “The employees were put in a very bad situation.” He added that while boards are typically only responsible to their shareholders, this situation may be different. “There has to be a balance,” he said, “to create sustainability for all the stakeholders.”

    Dan Neil, a Pulitzer Prize-winning columnist for The Los Angeles Times, led a lawsuit with other Tribune employees against Mr. Zell and Tribune this fall. The suit contended “through both the structure of his takeover and his subsequent conduct, Zell and his accessories have diminished the value of the employee-owned company to benefit himself and his fellow board members.”

    If the employees win, they will become Tribune creditors — and stand in line with all other creditors in bankruptcy court.

    The latest news on mergers and acquisitions can be found at nytimes.com/dealbook.
     
  3. sealybobo
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    sealybobo Diamond Member

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    Not surprised to see no one wants to discuss how these employees got fucked.

    And the neo con's don't think that government should regulate business? HA!!!
     
  4. Andrew2382
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    Andrew2382 Gold Member

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    Yes, cause we all know the government doesn't fuck people
     

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