Tribune offers big payday or mayday

TRIBUNE OFFERS BIG PAYDAY OR MAYDAY
[SOURCE: Chicago Tribune, AUTHOR: Michael Oneal mdoneal@tribune.com]
The significant risks and potential rewards facing Tribune Co. as a highly leveraged concern became clear this week when the company launched the first step in an audacious $8.2 billion gambit to take itself private. Documents filed with a tender offer for roughly half its outstanding shares disclosed for the first time the financial assumptions Tribune and its advisers used in assessing the company's various options during its six-month auction process. The documents also contain "pro forma" data showing what could happen to Tribune's financial picture when the company increases its debt to more than $13 billion after transferring ownership to an employee stock ownership plan and Chicago billionaire Sam Zell. The welter of charts, text and tables paints a vivid picture of the rich upside and chilling downside presented by the leveraged ESOP structure. For employees, who will end up owning 60 percent of the new Tribune, the potential returns could be staggering -- better than those of either Zell, who will control 40 percent, or management, which will receive phantom stock equivalent to 8 percent of the company. But if Tribune falters, as it did in the first quarter, those returns could evaporate quickly. And even if the company does just a little worse over the next five years, it could easily find itself rubbing up against debt covenants that could trigger a default.
http://www.chicagotribune.com/business/chi-0704270058apr27,0,5435767.sto...