Tribune Deal Faces Challenges

The proposed buyout of the Tribune Company by an ESOP and Sam Zell could possibly be derailed if certain credit covenants are not met. A stipulation in the credit agreement requires that the ratio of indebtedness to the trailing four quarters of EBITDA cannot exceed 9 to 1. Lower-than-expected reported earnings have made that target harder to meet, although the company does have substantial assets it either plans to sell (including the Chicago Cubs, which reportedly have already lured $1 billion offers) or could sell. The offer for the shares is at $34, but, as of July 24, the market price had fallen to $27.62, indicating investors are becoming somewhat wary over the chances the proposal will go forward. Zell does have an option to pull out of the deal. However, most observes still believe that, barring even worse news, the deal will proceed.