Thursday, April 24, 2008

Behind The Swagger and Foul Mouth, Sam Zell Coming Up Empty Answering the Hard Questions

Track Records Don't Mean Squat to Scared Banks

Here's how the numbers have crunched for Sam Zell so far: He buys Tribune with very little of his own money, but takes on $8.4 billion in debt.
OK, debt's a part of doing business as anything else. No biggie. Except when it is. And is is the rapid implosion of the newspaper business around the time Zell, flush from the billions he made as a real-estate mogul, took charge in 2007
All of a sudden the jeans-wearing, profanity-spewing, bearded tycoon has reason to sweat. There's the matter of a $650 million debt payment this year, to go with another $750 million the banks are anxious to get in 2009.
So, it's no surprise that Zell is selling Newsday, putatively to Rupert Murdoch, and wants to get rid of the Chicago Cubs and Wrigley Field.
Let's say all that happened, and all is right with Tribune's debt load through next year.
Then what?
Neither Zell nor anyone else has a clue, or they're not letting on. Either that, or providing the right answer is too horrible to contemplate, especially if print revenues keep plunging and profits at the 23 Tribune TV stations go soft, especially post-election.
If there's "significant erosion" now, as Zell conceded in an April 17 conference call, nothing in the economy suggests an about-face anytime soon, if ever.
Zell may feel hot under the collar now, but that'll be nothing compared to the heat generated by the fire sale that will ensue if Tribune defaults on its bonds and is forced into bankruptcy.
Zell told the A.P. last year "I probably am not as pessimistic about the future of the newspaper business as others might be."
Forgive Zell if he got in bed with the pessimists this year and doesn't bother crawling out.

No comments: