Bloomberg reports this morning that Standard & Poors has cut the debt rating for Tribco by two levels. Concerns about the potential sale (or lack of a sale) of the Chicago Cubs is cited as a major concern:
Tribune Co., the newspaper publisher and broadcaster taken private by billionaire Sam Zell, had its debt rating cut two levels to CCC by Standard & Poor’s, which said the Chicago Cubs may sell for less than anticipated.
The financing environment may limit bids or delay the sale of the Major League Baseball team, Wrigley Field and a stake in a television network, S&P said today in a statement. The rating is four levels above default.
Proceeds from the sale, earmarked to reduce Tribune’s $11.8 billion in debt, may be “significantly below” the expectation of $1 billion or more and may not be received by year-end, S&P analyst Emile Courtney wrote in a statement. Yesterday, Chicago- based Tribune reported a third-quarter loss of $121.6 million. Sales fell 10 percent to $1.04 billion.
hey ccd — what a clusterfuck, hm?
the revenue decline you highlighted the other day is the death knell for tribco. now structured as a levered buyout, the only real means of keeping tribco from default was steady free cash flow. there now is none, which of course is what s&p is picking up on. but pay no mind to “four levels above default” — ratings agencies are political and sensitive to causing defaults, and so are always well behind the reality curve. tribco is already finished — it’s just a matter of totting up the final count.
i would have to think that, even considering the near-impossibility of financing, the single greatest impediment to a sale at this point is the status of tribune itself. if you were john canning, why would you bother to buy the cubs now even if you could line up the financing? when you will soon be able to buy them out of a court-mandated restructuring without zell’s ego premium? seems to me that the cubs are as likely as not going to be a part of tribco when it defaults.
what’s more — and i promise i won’t turn this into another outlet for my economics obsession — watch davidowitz on bloomberg. it’s important to understand that we are living through a tectonic shift in the american economy. as 2008 becomes 2009, we are not going to see companies reorganizing — we are going to see them liquidating. there is no financing available for companies to reorganize, and so they don’t. i suspect that will be true of tribco as well as they continue to deteriorate even faster than the economy as a whole.
lol — sorry — that’s howard davidowitz. i’ll get this html thing down someday….
gm, you make a great point about why the hell would anyone deal with Zell and his ego (which should be shrinking any day now) when soon enough someone will be paying much less for this club than even I anticipated (and I was no where near as high as some). If you would have told me back in April of 2007 that this is how the story ends I would have scratched my head and said: ‘no-way’. But it sure looks like this is the way it will go. Zell fucked this up bigtime gm, B-I-G-T-I-M-E.
OT: Any idea what our old pal Denis FitzSimmons is up to these days?
swimming in his criminal $38mm severence between board meetings, no doubt. maybe the soon-to-arise angry homeless mob of former tribune employees with no retirement funds thanks to zell’s ESOP buyout finds him in the end.
wpbc, do we chalk this all up to Zell, or does a little bit of the blame go to Selig and the owners, who obviously seem not to want Cuban in their little cabal?
I’d chalk most of this up to Zell. I love to blame Selig at most oppotunities, but Zell and Company have just moved too slowly on this whole thing.
It’s ok. If it gets a lot worse, the government will just bail them out and buy the Cubs.
ccd — check this analysis of depression ad spending. if it’s even in the ballpark so to speak, tribco will go bust at its first refunding.
It definitely looks like this was Zell’s Charlie Croker moment. I think that to some extent, though, the decision to delay the sale speaks less to Zell’s ego or judgement and more to the nature of big business and especially real estate. You don’t just have to have a nose for business and access to capital to be a big-time developer — it’s really about using the leverage you have with the public sector to improve your entitlements, procure infrastructure to meet your needs, and maximize the value of your holdings beyond what an everyday schmuck could do as a result. Just ask Dennis Hastert about that one…
That’s really what the delay was about. Zell was holding out for the state to dump a shitload of money into buying the ballpark — something that might have happened in another time, when the state had money and his elected buddies didn’t already have one foot in Joliet. While he was waiting for the green light to screw the taxpayers, the world came crashing down, and now nobody has the scratch laying around to make him an obscene offer for the ballclub.
Except Mark Cuban, perhaps, but Uncle Bud don’t want that. It’ll be interesting to see what happens if he becomes the only viable buyer, and how loudly Zell screams to push for it to happen. Wishful thinking, I suppose…but it would be worth the price of admission just to see the resulting shitstorm.
LMAO, nice one md. I don’t think the governements gonna give a shit when Tribco goes bust and sells this team for cents on the dollar.
gm, this is what is going on in media. ad revenues are going in the fucking toilet. ad spends and all corporate spending on things like professional sports are in real trouble for 2009 and beyond.
for whatever reason, ccd, i’m running across a number of sport-realted stuff today.
near and dear to you in 1992 — the dallas cowboys are in a cash crunch.
in other deflationary news — the boston red sox will not raise ticket prices this year for the first time in 14 seasons.
2 very interesting stories regarding 2 of sports more popular franchises. I have stated on this page previously that this financial crunch will impact the Cubs on the field. I think the start of that may have come today when they dealt for Gregg, opting not to sign Kerry Wood to a big pay day. If the Cubs keep their payroll flat for 2009 I will be surprised.