The sale of the Chicago Cubs is reportedly moving forward, with chairman Crane Kenny saying that he hoped that the deal would be completed by Spring Training. The deal may move forward, but the current owner of the Cubs could fall under the weight of its own debt.
The Wall Street Journal reports today that the Tribune Co. is preparing to possibly file for Chapter 11 bankruptcy and has “hired investment bank Lazard Ltd. as its financial adviser and law firm Sidley Austin to advise the company on a possible trip” through the process, according to the WSJ.
As reported by the WSJ, the company has been sliding ever further in debt since the company was sold.
Tribune has been on wobbly footing since last December, when real-estate mogul Samuel Zell led a debt-backed deal to take the company private. Tribune has stayed ahead of its $12 billion in borrowings with the help of asset sales. Now, however, shrinking profits are tightening the noose.
The company's cash flow may not be enough to cover nearly $1 billion in interest payments due this year, and Tribune owes a $512 million debt payment in June.
The report goes on to say that one of the more pressing concerns for the publishing giant is that they may be in violation debt terms that limit borrowings at the end of the year to nine times its adjusted profits. How much was the ratio at the end of the second quarter for Tribune? 8.3. That was before a massive decline of 83% in operating profit for the three months that ended Sept. 28.
At is unknown, what, if any, impact Tribune filing Chapter 11 would have on the sale of the Cubs. At least three bidders are said to remain in the process to purchase the Chicago Cubs, Wrigley Field, and a 25 percent stake in Comcast SportsNet Chicago. Thomas Ricketts, chief executive of Chicago investment bank Incapital LLC and the son of Joseph Ricketts, the founder of TD Ameritrade Holding Corp; Marc Utay, a managing partner with New York-based private equity firm Clarion Capital Partners LLC; and Chicago real estate executive Hersh Klaff are still in the running.
Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is contributor to Baseball Prospectus, and is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network.
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