August 21, 2007
Zell and the Tribune Deal
The Zell $8.2 billion buyout of the Tribune Company will show some final surprises. At the time the deal was negotiated it was to have established a company with a razor thin ability to cover the new debt. Since that time, Tribune revenue has fallen further and the credit markets have tightened (driving up interest costs). Some say that there are two choices: cancel or renegotiate the deal. Is there a third choice? Let the deal close. The new company becomes insolvent and Zell buys the company from the bankruptcy trustee. He has used something like this before on real estate affected by the S&L bailout. In any event, there will be some final surprises.
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