The foolish financiers who lent money to the bankrupt Tribune Company are reportedly planning to sue recently departed Tribune destroyer Sam Zell, saying that he took on so much debt when buying the company that he made it "immediately insolvent."
This is, of course, factually true; Zell put in a little bit of his own money, a whole lot of Tribune employees' money, and purchased the deeply indebted company right as the newspaper industry industry entered full-on collapse mode. It was a breathtakingly bad deal. We admire this kicker on Josh Kosman's story in the New York Post today, which sums up the Zell era in three sentences:
In an ironic twist, soon after the $11.7 billion buyout, in which Zell committed only $315 million and had the company borrow the rest — in part by borrowing against newly issued employee shares — Zell visited [Tribune-owned NYC TV station] WPIX. A banner was unfurled on the 10th floor saying: "We Now Own the Company."
Those shares are now worthless.
UPDATE: Tribune Co. SVP of corporate relations Gary Weitman emails us the following:
1. No employee money whatsoever was used in Tribune's 2007 going-private transaction. None.
2. Sam Zell invested $315 million in Tribune-hardly a small sum of money.
3. Sam Zell didn't "purchase" the company; it has been owned by an ESOP since December 2007.
4. I'm not sure where you get the idea that it is "factually true" that the company was made "immediately insolvent" after the 2007 going-private transaction. There has been NO finding like that, no legal conclusion like that whatsoever, in any court of law at any level.
To those points I'd briefly respond,
1. This may be technically true—here is a more detailed explanation of the Tribune ESOP deal—but for employees who ended up losing money on Tribune's demise, well, money is money. Remember: "The employee ownership shares amount to stock options for Tribune's roughly 20,000 employees."
2. Zell's investment was a small sum in comparison to the purchase price, which was more than $8 billion.
3. See point #1.
4. The company's bankruptcy, courtesy of Zell, speaks for itself. This is a blog, not a court.
[Photo via AP]