All's Well That Ends Zell
Marty Kaplan
HuffPost
Los Angeles Times owner Sam Zell didn't file for bankruptcy because the newspaper business is being battered by the recession or by online competition. He went into Chapter 11 because of the irresponsible and boneheaded deal he made to take over Tribune Co. in the first place.
Zell's own financial chickens are coming home to roost. Unfortunately, the people who are paying the price for his recklessness are the citizens of Los Angeles and the staff of their premier paper.
Zell only put up $315 million of his own money to buy the Times' owner, Tribune Co. The rest -- $8.2 billion -- was highly leveraged debt; the deal, which nearly tripled Tribune's debt load, turned on a fancy maneuver creating an Employee Stock Ownership Plan executed behind the backs of Tribune's actual employees. The sorry result: a debt service of $1 billion a year.
Even if advertising were not dropping, even if subscriptions were not falling, Zell would have had no chance to cover his monthly nut without the waves of cutbacks he ordered, which have devastated Times morale and decimated its content. And even with those cutbacks, the bankruptcy is now proof of how misbegotten his strategy was in the first place.
(More here.)
HuffPost
Los Angeles Times owner Sam Zell didn't file for bankruptcy because the newspaper business is being battered by the recession or by online competition. He went into Chapter 11 because of the irresponsible and boneheaded deal he made to take over Tribune Co. in the first place.
Zell's own financial chickens are coming home to roost. Unfortunately, the people who are paying the price for his recklessness are the citizens of Los Angeles and the staff of their premier paper.
Zell only put up $315 million of his own money to buy the Times' owner, Tribune Co. The rest -- $8.2 billion -- was highly leveraged debt; the deal, which nearly tripled Tribune's debt load, turned on a fancy maneuver creating an Employee Stock Ownership Plan executed behind the backs of Tribune's actual employees. The sorry result: a debt service of $1 billion a year.
Even if advertising were not dropping, even if subscriptions were not falling, Zell would have had no chance to cover his monthly nut without the waves of cutbacks he ordered, which have devastated Times morale and decimated its content. And even with those cutbacks, the bankruptcy is now proof of how misbegotten his strategy was in the first place.
(More here.)
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