The credit analysis firm Fitch Ratings said Monday that the bank lenders that provided the bulk of the financing might recover as little as 31% of the investments.
For other debt holders, Fitch said, “0% recovery is realistic.”
The bond market had anticipated Tribune’s looming distress. As recently as two weeks ago, some Tribune bonds were trading as low as 14 cents on the dollar.
The NYT points out that ex-employees are getting the shaft, too:
A note on an internal Tribune Company Web site said, “All ongoing severance payments, deferred compensation and other payments to former employees have been discontinued and will be the subject of later proceedings before the court.” That made it apparent that employees who recently were laid off or took buyouts would join the long list of unsecured creditors.
The Journal says Zell will be wiped out:
Last year, Mr. Zell’s firm invested $315 million in Tribune in exchange for a subordinated note and a warrant entitling it to acquire 40% of the stock. He now says he assumes his investment is worthless.
The Chicago Tribune’s story is a good roundup that hits most of the issues, and this is useful:
Douglas Baird, a bankruptcy specialist at the University of Chicago Law School, agreed that Tribune Co.’s Chapter 11 filing is much less complicated than other big ones such as United Airlines. Since the company’s papers and TV stations generate cash flow on their own, the bankruptcy court will focus on restructuring the balance sheet, not operations, he said.But Baird and others also said that the bankruptcy process tends to accelerate any sort of operational restructuring that is under way.
The memo we will never see:
To: Tribune Company employees
From: Sam Zell
As you all know, we are facing a perfect storm in the newspaper business. The Internet has fragmented both audiences and advertising, and now the recession has driven advertisers under cover.
This is an unfortunate situation because we have a lot of debt here at the Tribune Company, and, as you know, it is YOUR debt, not mine. We bought this company by leveraging your pension plan. Nonetheless, I am committed to ensuring that the Tribune weather these economic storms.
To this end, I am announcing today that the Chicago Cubs are going to play two players short of a full payroll next year. I invested $118 million in the team last year, and they couldn’t get through the first round of the playoffs.
I can get a better return for my money by investing it in the newsrooms of our newspapers. In consultation with the Cubs management, I have decided to lay off two players, Henry Blanco and Derek Lee. Together, they made $16.4 million. I estimate that this money will pay the salaries of 234 journalists, roughly 23 additional people at each of our newspapers.
Blanco failed to get on base two-thirds of the time he batted, and I paid him $55,000 for every game he played. I paid Lee $85,500 for each game he played, and he drove in only 90 runs.
I expect these 234 journalists to be much more productive. In turn, I expect them to attract more readers, which will attract more advertisers. I am happy to support our journalism.
Posted by Daryl Moen on Tue 9 Dec 2008 at 05:31 PM
As a senior secured bond holder with a note due 12/08/08, my account was credited for the amount owed to me, then the next day the redemption was reversed taking the 30,000 that was put into my account back out. How this happened is a huge question but a bigger question is what should I expect? Its amazing the maturity date turned out to be the same date that the bankruptcy was announced. My account was funded moments before the bankruptcy was filed and then the next day my account was debited with a notation redemption reversed. Should I have any recourse becasue the $30,000 was entered into my Pershing account and and then the next day (24 hrs later) it was taken back out.
Posted by Calvin Bradley Klein on Tue 9 Dec 2008 at 07:55 PM