Tribune Co. Proposing Tax-Avoidance Strategy For Cubs Sale
Tribune Co. in its sale of the Cubs is "proposing a tax-avoidance strategy that likely would require a buyer to borrow heavily" to pay for the franchise, according to Ameet Sachdev of the CHICAGO TRIBUNE. Tribune Co. Chair Sam Zell "wants to create what's known as a leveraged partnership between the buyer and Tribune to own the team. The partnership would borrow money to buy the team, and the proceeds from the loans would go to Tribune." Sources indicated that the "highly leveraged financial structure has produced concern among prospective buyers about their ability to operate the Cubs in a competitive manner." MLB is "nervous about any of its teams being saddled with too much debt," and the league has "conservative guidelines about the amount of debt ballclubs can carry." But MLB's "tolerance for such a deal won't be known until Tribune presents the league with a purchase agreement." Three-fourths of MLB's 30 owners must approve the sale. MLB's CBA with the MLBPA "limits total club debt to about 10 to 15 times cash flow." A source close to one of the five prospective buyers said, "The more debt you put on it, the more expensive it is. The more leverage, the more scrutiny you get from [MLB]." Another source said that Tribune Co. has had a "running dialogue with league officials and is sensitive to their concerns" (CHICAGO TRIBUNE, 8/13).
CUBAN'S A CATCH: ESPN.com's Peter Gammons wrote MLB "should embrace owners like [Mavericks Owner Mark] Cuban who can help grow the sport and attract an even wider fan base." By adding Cuban, the Cubs "might quickly become the premium franchise of the National League. This would be great for baseball and great for a city that this past weekend -- and this entire season -- has been the center of the baseball universe" (ESPN.com, 8/11).
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