The Vegas angle to the Tribune bankruptcy

There's a Vegas sidebar to the news Monday that the Tribune newspaper company has filed for bankruptcy.

You may remember that after Sam Zell took the company private, he appointed Las Vegas Sun owner Brian Greenspun to the board. It previously had not been disclosed how much it took to buy a board position on the company that operates the Los Angeles Times and the Chicago Tribune, but it will probably become public in the bankruptcy filings. Tens of millions, I suspect.  At the time, L.A. journalists did stories on the move with the idea that maybe, just maybe, Greenspun's presence on the board might save the newspapers. I told reporters who called about the theory that, while I wish the best for the Tribune's newspapers, given Greenspun track record in Las Vegas, financially and journalistically, the theory seemed like whistling in the dark.

Looks like I was right then and, believe me, I hope I'm wrong now when I suggest there's more pain for the newspaper company ahead. Investors like Greenspun could get wiped out. But investors can usually look out for themselves. The employees, however, could really get hurt if Zell is unable to navigate the company out of the soup.

Consider this bit of wisdom from the Wall Street Journal: "To many people, the math never worked from the beginning. Tribune’s revenues had been falling precipitously for years. Zell offered a generous $8.2 billion offer for Tribune to win against two other billionaires halfheartedly bidding for the company. From the beginning, his plan was that the price tag would be paid through the pensions of Tribune’s 20,000 workers, held in an employee stock ownership plan, or ESOP. The ESOP structure was designed to reduce Tribune’s taxes to nearly zero and it lowered Zell’s own price tag to $315 million. Unfortunately, it also left a $12 billion debt load to pay just as the newspaper industry as a whole is largely cratering on lower ad revenues. The principle — that the company could hoard its declining cash flows to pay down this enormous debt — was flawed. Cash flows declined, and tax savings couldn’t help." You can read the rest of this analysis at:
http://blogs.wsj.com/deals/2008/12/08/ the-tribune-buyout-was-it-ever-a-good-idea/

You can find the actual bankruptcy filing at:
http://www.latimes.com/media/acrobat/2008-12/43780595.pdf

Oh, and one more thing: If you want to catch a glimpse at what ails the Sun at the core, read last week's Greenspun column in which he admonishes the Review-Journal for writing "negative" stories. Negative stories? He's referring to some investigative work on financial disclosure and practices at the Las Vegas Convention and Visitor's Authority. Be sure to bring that journalistic concept up at the next L.A. Times board meeting, slick.

You can catch Greenspun's commentary, which includes a revealing soliloquy on why the LVCVA should gratefully pay him money to be a vendor, at:
http://www.lasvegassun.com/news/2008/dec/07/ time-propping-not-tearing-down/.
Even the now-arrested governor of Illinois would blush at Greenspun's ploy.

Update: Tuesday's Chicago Tribune reports that bankruptcy experts think that Zell and his investors will likely recoup some of their investment, but employees are likely to get wiped out. You can see the full sad story here: http://www.chicagotribune.com/business/ chi-tue-tribune-esopdec09,0,1307530.story