Tribune Co. prepared Thursday to close its $8.2-billion deal to go private, triggering regulatory waivers and pulling $500 million in cash out of its coffers to reduce the amount it needed to borrow.
The stock jumped nearly 8% to close at $32, its highest price in six months, as Wall Street skeptics finally seemed to acknowledge that the deal was likely to close this year after all, and at the announced $34 price.
Tribune, owner of the Los Angeles Times and KTLA-TV Channel 5, said it would use as much as $500 million to reduce a bridge loan to $1.6 billion from $2.1 billion. The loan is the most expensive part of the bank financing involved in the buyout, led by Chicago financier Sam Zell, so it makes financial sense to shrink it, according to a person familiar with the transaction who spoke on condition of anonymity because he had not been authorized to comment.
Much of the cash will come from a $350-million tax refund Tribune received in a settlement last June with the Internal Revenue Service over the 1998 sale of a publishing subsidiary.
The cash infusion will reduce the total borrowing in the second and final stage of the buyout to $3.7 billion from $4.2 billion.
"This gives the company a bit of breathing room and perhaps alleviates a bit of the anxiety" for the bankers, said Edward Atorino, publishing analyst with Benchmark Co. in New York.
The deal's closing still is subject to a solvency opinion from an outside appraiser, but people involved in the transaction believe that Tribune will clear that hurdle.
Tribune also acted to secure temporary waivers from the Federal Communications Commission for its newspaper and TV station combinations in Los Angeles and four other markets.
Last week, the FCC granted Tribune conditional waivers of at least two years from its cross-ownership ban. The agency did so in an unusual way that could have left Tribune dependent on a Dec. 18 FCC vote to ease the cross-ownership rules in the nation's top 20 markets.
The waivers will be triggered if the FCC changes its rule before Jan. 1, giving Tribune relief as public interest groups are expected to sue to block their implementation. Tribune could also trigger the waivers itself by challenging the FCC's denial of its request for permanent waivers in all those markets except Chicago.
With Tribune eager to secure the waivers to proceed with its closing and because of the possibility that the Dec. 18 vote will be delayed, Tribune filed a notice of appeal Monday in the U.S. Court of Appeals for the D.C. Circuit. "This appeal was, in essence, invited by the FCC's action on Friday," Chief Executive Dennis J. FitzSimons said in a companywide memo to employees Thursday.
Tribune's action could allow the court to overturn the cross-ownership ban entirely, warned FCC Commissioner Michael J. Copps, a Democrat who opposed the waivers.
He charged that the unusual waiver provision was engineered by the FCC's Republicans as a back-door way to avoid the political fallout of eliminating the rule themselves.
"Tribune apparently now has done their part," Copps said Thursday. "The next step will be for the majority to mount a lukewarm defense of the rule in court and hope that the entire rule gets thrown out."
FCC Chairman Kevin J. Martin has said the appeal provision is designed to allow Tribune to close its deal by the end of the year.