Tribune Deal Means Zell Wins and Workers Lose

Bouncing off of Cramer’s lucid post regarding the Tribune (TRB) deal (when Cramer is good, he is goooood), I wonder if it wouldn’t be better for all involved if the deal didn’t fail. As I pointed out before, Zell doesn’t have a lot of skin in the game, and the workers get all of the downside and little of the upside. Zell has a lot of upside, relative to his contribution, which means little downside.

Don’t get me wrong, the newspaper business is tough. My view is that the ESOP should refuse to fund the deal, and let the equity price fall. Someone will fund the deal at a lower price, and the remaining workers will get paid, if less than before.

One great lesson of all of this is that no matter what labor demands, it is impossible for labor to do well if the industry does not do well.

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[Long-Short Guy:]

Related:
<blockquote>
<b>Tribune Debt Default Risk Tops 50 Percent, Swaps Show</b>

Tribune Co. has a 50-50 chance of missing interest payments on some of the $13 billion in debt it will have after real estate investor Sam Zell buys the company, trading in the company's credit-default swaps shows.

Prices of the swaps, financial contracts used to speculate on a company's ability to repay debt, have jumped $331,000 since the first step in the sale was completed in May. It costs $770,000 to protect $10 million of Tribune bonds for five years, according to CMA Datavision, indicating a more than 50 percent risk of default. That's up from 32 percent on May 24, based on a JPMorgan Chase &amp; Co. pricing model...
</blockquote>

Source:
www.bloomberg.com/apps...;sid=asofdml9.MS8

2007 Jul 22 09:46 AM