Report: Zell Could Lose Control of Tribune Co. | Adweek Report: Zell Could Lose Control of Tribune Co. | Adweek
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Report: Zell Could Lose Control of Tribune Co.

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Tribune Co. and the creditors that hold its $8.6 billion in debt are talking about a plan that could wrest control of the Chicago-based media giant from billionaire Sam Zell, the flagship Chicago Tribune reported Sunday.

According to the report by Chicago Tribune business reporter Michael Oneal, Tribune and its banks and investors are looking at a plan that would involve "a debt-for-equity swap that probably would give the senior lenders a large majority ownership stake in the reorganized company."

Quoting an unnamed "source with knowledge of the situation," the Tribune said the plan would do away with the warrant Zell has that gives him the right to buy 40 percent of the company for $500 million. The warrant is the basis of Zell's control of Tribune, whose ownership is structured as an employee stock ownership plan (ESOP). Zell spent $90 million for the warrant in the $8.2 billion transaction that took Tribune private in December 2007.

In a statement, according to the Tribune account, Tribune Co. said Zell and other top executives "remain actively engaged and committed to this company. The restructuring is still in progress, and it is premature to speculate about the final ownership structure." The statement was not posted on Tribune's Web site as of late Sunday night.

Zell's going-private deal, structured around the ESOP, ballooned the company's debt to about $13 billion. Within a year of the December 2007 deal and pressured by falling revenue and cash flow, Tribune filed for Chapter 11 bankruptcy reorganization.

Senior creditors have claims of some $8.6 billion, but the senior debt has been trading at about 30 cents on the dollar, putting the worth of the debt at less than $3 billion.

Tribune business reporter Oneal's article quotes Howard Seife of the New York firm Chadbourne & Parke, representing the committee of unsecured creditors, as saying negotiations on the shift of control have so far been "fairly general and not particularly advanced."