Chicago Cubs Bids Said to Be Less Than $1 Billion and Dropping 09/12/2008 |
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The bids Tribune Co. received for the Chicago Cubs baseball team ranged from $850 million to $950 million and should decline now that the parent company is in bankruptcy, a person with knowledge of the process said.
Tribune, saddled with $12.9 billion in debt after being taken private by billionaire Sam Zell a year ago, needed to sell the Major League Baseball team for at least $1 billion and repay its Tranche X loan to avoid breaching yearend debt covenants, according to CreditSights Inc. debt analyst Jake Newman.
“I’ve always been skeptical that they could get that much for the Cubs,” Newman said in an interview today before Tribune filed for Chapter 11 bankruptcy protection.
The Cubs weren’t included in Tribune’s filing, and the sales process for the team, ballpark and related assets will move forward. Since taking over Tribune, Zell has been cutting jobs and selling assets including Newsday in Long Island, New York, to cope with the debt load and declining revenue.
Bidders in the latest round included Tom Ricketts, the chairman of Incapital LLC whose father founded TD Ameritrade Holding Corp.; Hersch Klaff, a real estate executive; and Marc Utay, managing partner of Clarion Capital Partners LLC, according to the person, who spoke on the condition of anonymity because the negotiations are private.
Estimates for the sale of the team, its Wrigley Field ballpark and a 25 percent stake in Comcast Corp.’s Comcast SportsNet Chicago ranged from $800 million in April to $1.3 billion in July.
Gary Weitman, a spokesman for Tribune, wasn’t immediately available to comment.
Leverage Ratio
A second person with knowledge of the process said the team over-estimated the potential for ticket price increases, on-site real estate development and baseball’s willingness to approve an owner who borrowed huge sums to purchase the franchise.
Tribune’s leverage ratio, the amount of debt relative to its adjusted cash flow, was 8.3 at the end of the second quarter. Newman estimates that the ratio was at 8.7 at the end of the third quarter. Lending agreements required that ratio to remain below 9 through yearend.
Without the repayment of the $512 million balance remaining on its Tranche X loan that’s due in June and the sale of the Cubs for at least $1 billion, Tribune would likely have fallen into technical default, Newman said.
The company has assets of $7.6 billion, according to court documents.
(Source: Bloomberg)
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