Zell or no, Tribune team wants to remain in place

Tribune Co. Chief Operating Officer Randy Michaels signaled Thursday that his team wants to lead Tribune's operations when it emerges from Bankruptcy Court.

Responding to speculation that Tribune Chairman Sam Zell would leave Tribune when creditors holding $8.6 billion in debt take control, Michaels said in an e-mail to employees that "while the ownership structure of the company is likely to change, current operating management is committed, and intends to remain in place during and after the restructuring."

Michaels termed "absurd" suggestions in media reports that the company might be liquidated by lenders looking to trim their losses. "We believe there is tremendous value in our current asset mix" and that "the whole of Tribune is greater than its sum of parts," he said.

How the new ownership structure would shape up and who would remain among Tribune management or the company's board will be the subject of negotiations, but by virtue of their enormous claims, the creditors ultimately will decide. Tribune Co. has until Nov. 30 to hammer out a plan, but that deadline could be extended.

Zell gained control of Tribune Co., which owns the Los Angeles Times, the Chicago Tribune and many other media properties, through a heavily leveraged transaction to take the company private for $8.2 billion in late 2007. That saddled Tribune Co. with $13 billion in debt just as the bottom fell out of the ad market, and within a year Zell, also chief executive, put the company in Chapter 11 protection.

The reorganization plan would probably transfer control of the media conglomerate from Zell to a group of large banks and investors using a debt-for-equity swap that would give the senior lenders a large majority ownership stake in the reorganized company.

One key result would be to wipe out a $90-million warrant Zell negotiated as part of the going-private transaction, people familiar with the negotiations said. The warrant gives Zell the right to buy about 40% of the company for $500 million and is the basis of his control of the company.

A Tribune spokesman said Michaels would not elaborate on his e-mail. Zell was out of the country and unavailable for comment.



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