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http://www.nytimes.com/2008/12/09/business/media/09sorkin.html?_r=1&hp
"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.)
As Mr. Newman, an analyst at CreditSights, explained at the time: “If there is a problem with the company, most of the risk is on the employees, as Zell will not own Tribune shares.” He continued: “The cash will come from the sweat equity of the employees of Tribune.”
And so it is.
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."
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Can any LBO talker make sense of this for me and others? How can one finance the purchase of an entire company with (apparently) not much more than the future value of the company's pension plan assets? And aren't those assets really obligations in any case? How can one own a majority stake in a company and not own any shares? It's enough to make my head explode... I can only imagine how Tribune employees feel... maybe they could take a cue from the Republic Windows and Doors workers around the corner and seize the presses.
Anyhow, the full Sorkin article, while incoherent from my point of view, has lots of juicy details regarding the beneficiaries of the buyout, for those interested.
Cliff