"If you are neutral in situations of injustice, you have chosen the side of the oppressor. If an elephant has its foot on the tail of a mouse and you say that you are neutral, the mouse will not appreciate your neutrality." --Bishop Desmond Tutu

Tuesday, December 09, 2008

Sam Zell: Flaming Asshole of the Day!

So the Tribune Company has filed for bankruptcy. No surprise, the pressure on print media is intense these days. Papers are folding left and right, being replaced by more aggressive on-line media outfits and by the citizen-reporters on blogs. But the Tribune case is special because the guy who scooped up all these papers risked his employee's pension plan to finance the deal.

There is a lot of blame to go around, and much of it will be directed at Mr. Zell, the real estate baron whose knack for buying when everyone else is selling earned him a fit sobriquet for the news business these days: The Grave Dancer.

Advertising is in a free fall, and every newspaper is suffering. But Mr. Zell literally mortgaged the future of Tribune’s employees to pursue what one analyst, Jack Newman, at the time called “a childhood fantasy.”

Mr. Zell financed much of his deal’s $13 billion of debt by borrowing against part of the future of his employees’ pension plan and taking a huge tax advantage. Tribune employees ended up with equity, and now they will probably be left with very little. (The good news: any pension money put aside before the deal remains for the employees.)
What an asshole. What's worse is that he gets to stand in line with the other "creditors" when the liquidation sale happens so his risk is significantly lower than the risk faced by his employees.
Granted, Mr. Zell, 67, put up some money. He invested $315 million in the form of subordinated debt in exchange for a warrant to buy 40 percent of Tribune in the future for $500 million. It is unclear how much he’ll lose, but one thing is clear: when creditors get in line, he gets to stand ahead of the employees.
Like the CEO of GM who whines about being a "sacrificial lamb" because he has to give up his bonus, Zell risked everything up front, but expects others to take the fall on the back end. What a tool.

No comments: