Wednesday, December 10, 2008

ESOPS Likely to Suffer First in Tribune Bankruptcy

Graph_down Chicago is NOT the place to be these days - especially if you are a corrupt politician or a financially-stressed newspaper.  On the newspaper side of things - Elizabeth Dale (Florida) writes to tell us that the ESOP angle of the The Tribune Company bankruptcy is truly a mess.

She points us to this story from the New York Times Deal Book

The possibility of a bankruptcy filing at Tribune Company is an embarrassing development for Samuel Zell, the real-estate mogul who took the media company private last December.

But it is likely that Tribune’s employees — or, more specifically, the employees’ stock-ownership plan — would take the first hit.

Because of the unusual structure of Tribune’s $8 billion buyout, Tribune’s employee stock-ownership plan holds 100 percent of Tribune’s common equity, regulatory filings show. Common stockholders are generally the first to take a loss in a bankruptcy restructuring, and they usually recover next to nothing.

Mr. Zell, by contrast, supplied mostly debt in the complex transaction, putting him higher in line to get paid. His $315 million investment in the Tribune deal consisted of a $225 million promissory note; the rest was for warrants to buy about 40 percent of Tribune’s stock in the future.

Great, another self-centered corporate CEO looking out for himself and screwing the employees of his company.  I guess we should be thankful that at least he is not asking for a bail out.

More about this story here.


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» The Tribune Bankruptcy and Breach of Fiduciary Duty Litigation Over its ESOP from Boston ERISA Law Blog
I had a whole line of things I was planning to blog on, but events keep overtaking them. Today, that is the story of the Tribune bankruptcy, and its effect, detailed here, on the Tribune ESOP. We have all been... [Read More]

Tracked on Dec 11, 2008 8:31:37 AM


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