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Zell Faces Loss of Control of Tribune Co.

Control of the Tribune Co. could wind up in the hands of a group of large banks and investors rather than in the hands of Sam Zell, if negotiations between Tribune Co. and its creditors continue on their current course.

Sources close to the situation say that the current plan of reorganization being negotiated in bankruptcy court - a plan still in its infancy - could transfer control of the company away from Chicago billionaire and Tribune Co. chairman Sam Zell, writes the Chicago Tribune. The new capital structure looks to center on a debt-for-equity swap that would give senior lenders a majority ownership stake in the newly reorganized company.

The plan would likely eliminate a $90 million warrant which gives Zell the right to purchase 40% of the company for $500 million. Tribune Co. said in a statement to the newspaper that Zell remains actively committed to the company, and that it is “premature to speculate about the final ownership structure.”

In April, Zell said that his complicated $8.3 billion deal to purchase Tribune Co. was a mistake. He didn’t foresee the decline
in the newspaper industry and was too optimistic in terms of the newspaper’s ability to preserve its position.

Newspaper ad revenue experienced the steepest decline in their history during Q1 09, down $2.6 billion, according to the Newspaper Association of America. Ad revenue plummeted 28.3% compared to the same quarter last year, to $6.6 billion. Print revenue fell 29.7%, with classifieds falling 42.3%.