Tribune's Bankruptcy Filing Likely To Complicate Cubs Sale
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Tribune Retains Control Of Cubs,
Wrigley Sale By Excluding From Filing |
Tribune Co. said that yesterday's Chapter 11 bankruptcy filing will "not alter its plans" to sell the Cubs and related assets, but sources indicated that the sales process will "get more complicated," according to Ameet Sachdev of the CHICAGO TRIBUNE. Tribune did not include the Cubs or Wrigley Field in its filing, which allows it to "retain control of the sales process," but sources indicated that the company will "have to keep creditors informed about the auction, and the winning bid will have to be signed off by a bankruptcy judge." A source said keeping the team out of bankruptcy will "allow the process to move along more quickly. That's in the banks best interest and the Tribune's interest." Sachdev reports bidders for the Cubs, Wrigley and a 25% stake in CSN Chicago yesterday "began scrambling to find bankruptcy advisers of their own." The bidders want to know "how the bankruptcy affects the highly leveraged partnership Tribune Co. sought from a Cubs buyer to avoid a huge capital-gains tax expected from the sale of the franchise." Sachdev notes had the team been included in yesterday's filing, it "would have been a black eye" for MLB, "given that the Cubs are one of its signature franchises" (CHICAGO TRIBUNE, 12/9). The WALL STREET JOURNAL's Shira Ovide notes two of the groups bidding for the Cubs and related assets yesterday "expressed deep frustration at a process they now expect will be substantially delayed because of the role the bankruptcy court will play in any transaction." The financial adviser for one bidding group said, "This is an absolute mess. God [knows] what happens now." Tribune said that the Cubs were "excluded from the bankruptcy protection with the intent of minimizing the impact on the auction" (WALL STREET JOURNAL, 12/9).
PROCEEDING WITH THE SALE: CRAIN's CHICAGO BUSINESS' Mike Colias cited financial experts who indicated that the Cubs sale, when a bidder is chosen, could "go quickly," even though it is now likely that a bankruptcy court judge will have to approve any sale. Univ. of Chicago law professor Douglas Baird said the bankruptcy filing "would mean that the creditors would have a bigger seat at the table, but they'll be every bit as interested as [Tribune Co. Chair] Sam Zell is in getting money quickly" (CHICAGOBUSINESS.com, 12/8). Meanwhile, BLOOMBERG NEWS' Rabil & Eichelberger reported the latest bids for the Cubs and related assets ranged from $850-950M and "should decline now" following yesterday's filing. CreditSights Inc. debt analyst Jake Newman said that Tribune needed to sell the Cubs for at least $1B and "repay its Tranche X loan to avoid breaching yearend debt covenants." Newman: "I've always been skeptical that they could get that much for the Cubs." A source indicated that Tribune "over-estimated the potential for ticket price increases, on-site real estate development and baseball's willingness to approve an owner who borrowed huge sums to purchase the franchise" (BLOOMBERG NEWS, 12/8). Content Next Research Dir Lauren Rich Fine: "The sale of the Cubs was supposed to be the short-term Band-Aid for Tribune" (DAILY VARIETY, 12/9).
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Hendry Says Tribune Bankruptcy Filing
Will Have No Effect On Cubs' Operations |
BUSINESS AS USUAL: In N.Y., Richard Sandomir reports by being separated from Tribune's filing, the Cubs can "sign free agents or make trades and operate as if what's happening" is a "distant corporate annoyance." Cubs GM Jim Hendry: "No change in anything. No budget structure different. No job cutbacks. No pay cuts for our employees on the baseball side. Nothing." Sandomir notes had the Cubs and Wrigley been part of the bankruptcy proceedings, they would have been "subject to the intense daily scrutiny of creditors eager to get their money and to a likely court-ordered restart of the bidding." The amount the Cubs spend for free agents this offseason "could have been questioned or restricted." However, under "certain circumstances, Tribune creditors could try to force the Cubs into bankruptcy or seek to impose court oversight on its operations" (N.Y. TIMES, 12/9). The GLOBE & MAIL's Grant Robertson reports the franchise will "continue to meet its financial obligations as normal, in order to not slow the potential sale" (GLOBE & MAIL, 12/9). Chicago Tribune reporter John Mullin said of the bankruptcy, “You hope it results in a re-structuring that allows business to continue and the company to work its way out of the situation.” Chicago Tribune reporter Dave Van Dyck: “The Cubs aren’t losing money any how. The Cubs are still a cash cow” (“Chicago Tribune Live,” CSN, 12/8).
TRIALS & TRIBULATIONS: Zell yesterday said that the company's business units would "operate as normal and that the focus of the reorganization would be 'on our debt, not on our operations.'" In L.A., Rainey & Hiltzik note Tribune's "woes stem from a combination of plunging advertising revenue and a heavy debt load" of $12.9B, "much of it incurred a year ago" when Zell took the company private (L.A. TIMES, 12/9). Tribune said that its newspapers, which include the Chicago Tribune and the L.A. Times, and TV stations "'will continue to operate' during the restructuring" (USA TODAY, 12/9). In N.Y., Richard Perez-Pena writes bankruptcy -- a "rare step for a big newspaper company -- calls into question the future shape of a company with more" than $4B in annual revenues. Kirkland & Ellis bankruptcy lawyer James Sprayregen said that companies will "often choose to file for bankruptcy when it becomes clear that they will eventually need protection, even if they are making their debt payments." Sprayregen: "It obviously wasn't an emergency or they would have filed Sunday night. They chose a time that was financially advantageous" (N.Y. TIMES, 12/9).
BLAGOJEVICH ARRESTED: Illinois Gov. Rod Blagojevich and his Chief of Staff John Harris this morning were arrested by FBI agents on federal corruption charges. One aspect of the federal prosecutors' allegations is that the two “conspired to demand the firing of Chicago Tribune editorial board members responsible for editorials critical of Blagojevich in exchange for state help with the sale” of Wrigley (CHICAGOTRIBUNE.com, 12/9).
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