Tuesday, August 14, 2007

credit shocks rocking tribco's boat

please pardon my paucity of posting (absurd alliteration, anyone?) in the last week or two but the office is making unreasonable (read: normal) demands. and i can even find a cubs angle for it:

One estimate is that at least half of the risky subprime deals have yet to surface, indicating much more bad news is on the way. But the second issue is of perhaps even greater concern: What are the long-term problems that could be created by the unwinding of a "massive pipeline" of existing leveraged buyout and other restructuring deals written in the last few months and predicated on pricing assumptions that no longer hold true? Many of these corporate deals were "priced aggressively or with risky structures, and it is impossible to get these deals done now. There is no acceptance for that type of risk," Gordon said.

"The markets have shut down" as investors wait for risk to be repriced,” he said, noting that the overhang is "billions of dollars in bridge loans" that have not yet been funded. The result? "We have seen this drag down markets that are fundamentally very sound, especially commercial real estate and the financial sector."

one of those lbo deals which was "priced aggressively or with risky structures" is none other than the tribune's sale to sam zell. i've not heard a word about it specifically -- but with credit conditions seeming to worsen daily in spite of central bank repos on the order of the gross national product of argentina, the completion of the deal is more questionable now than three weeks ago.

UPDATE: actually, now i have heard a word about it, however ill-founded but well-reasoned.

Shares in The Tribune Company (TRB) are off almost 4% today to $24.57. The price promised for an LBO lead by Sam Zell is $34.

The deal is now likely to die, in which case the public shareholders can hang onto the company, probably with the stock falling further.

Or, Zell can renegotiate in much the same way the the buyers of Home Depot (HD) Supply have. The debt needs to deal of this kind has simply gotten too expensive.

Zell's best bet may be to walk. Dow Jones (DJ) announced yesterday that ad lineage at The Wall Street Journal fell almost 21%.

And, Zell can read the papers.

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