The Deal from Hell (56 page)

279
Zell dismissed speculation
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; transcript of lenders' meeting, April 26, 2007.

279
“I thought the chances of getting the second . . .”
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; examiner's interview of Samuel H. Zell, Chicago, IL, June 14, 2010.

279
A report from Lehman Brothers
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

280
knocked the company's 2007 operating profit off 40 percent.
Tribune Company Form 10-K for fiscal year ended December 31, 2007.

281
When JPMorgan Chase tried to syndicate
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141. Series of interoffice e-mails at Merrill Lynch between Todd Kaplan and Victor Nesi that said the deal was not going well, May 10, 2007. Also, e-mail from Jeffrey A. Sell, former head of special credits group in the credit risk department of JPMorgan Chase, to Brian S. Sankey, May 12, 2007, that said the orders had fallen short.

281
One brokerage firm analysis suggested Tribune
“Tribune Debt Default Risk Tops 50%, Swaps Show,” by Tim Mullaney and Shannon D. Harrington,
Bloomberg Report
, July 20, 2007. The pessimistic forecast was done by CMA Datavision of London, England.

281
Peter Cohen told his boss, the bank's chairman
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; JPMorgan Chase interoffice e-mail from Peter Cohen, managing director, to Jamie Dimon, chairman and CEO.

282
To close phase one of the deal
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

282
The company's outstanding bonds took an even bigger hit and
“Tribune Debt Default Risk Tops 50%, Swaps Show,” by Tim Mullaney and Shannon D. Harrington,
Bloomberg Report
, July 20, 2007.

283
paying just under 8 percent interest
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

283
At JPMorgan Chase, one alarmed banker
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

283
Jimmy Lee, a JPMorgan Chase
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; JPMorgan Chase interoffice e-mail from James B. Lee, Jr., vice chairman, to Patricia Deans, analyst.

283
FitzSimons, who assumed he would resume
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; deposition of Dennis J. FitzSimons, Chicago, IL, June 25, 2010.

284
Darryl Jacobson asked if the bank could suggest
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; JPMorgan Chase Syndicated and Leverage Finance Group interoffice e-mail from Darryl Jacobson to Rajesh Kapadia, September 26, 2007.

284
But Dimon wasn't about to shaft a major customer
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; JPMorgan Chase interoffice e-mail from Jamie Dimon to Darryl Jacobson, September 6, 2007.

284
One Deutsche Bank analyst concluded
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

284
But Dimon disagreed: “Sam until very ”
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; examiner's interview
of Jamie Dimon, chairman and CEO, JPMorgan Chase, New York, June 25, 2010.

284
Zell claimed that he hadn't invested
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; examiner's interview of Samuel H. Zell, Chicago, IL, June 14, 2010.

284
The internal math on the deal put Zell's rate of return
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

284
When Tribune's stock dropped to $25 a share,
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

285
Analysts at the lead banks suddenly became quite interested
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

285
prompting Yang Chen at Citicorp to
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

285
Things got pretty sticky. At Tribune, the
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

285
Not long after the Tribune had hired VRC, Citicorp
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

286
after Rajesh Kapadia from JPMorgan Chase told Larsen
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

286
Tribune's general counsel, Crane Kenney
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; deposition of Crane H. Kenney, former general counsel of Tribune, Chicago, IL, July 8, 2010.

286
Ben Buettell, one manager at Houlihan Lokey Howard & Zukin
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; deposition of Ben Buettell, December 2, 2009.

287
penguins called
Our Iceberg Is Melting
.
Our Iceberg Is Melting
, by John Kotter (New York: St. Martin's Press, 2006).

288
“You are on the board, you sit on the board. . . .”
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; examiner's interview of Samuel H. Zell, Chicago, IL, June 14, 2010.

288
Afterwards, FitzSimons let Zell know he was dealing with someone
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; deposition of Dennis J. FitzSimons, Chicago, IL, June 25, 2010.

289
“I'm not doing anything. I'm not giving you any power . . .”
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; examiner's interview of Samuel H. Zell, Chicago, June 14, 2010.

289
Behind the scenes, he had asked his trusted aide
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; memorandum labeled, “Tower Strategy,” to Sam Zell from Bill Pate, August 9, 2007.

289
1990s. He asked Michaels to come up
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; e-mail from Randy Michaels to Sam Zell, August 20, 2007.

290
“Begin the process of creating products focused on consumer . . .”
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; e-mail from Randy Michaels to Sam Zell, August 20, 2007.

290
including the late Warren Christopher,
Author's recollection of luncheon. The author attended the lunch and took notes on the proceedings.

296
In August, the lead banks—JPMorgan Chase
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

296
The response triggered more back and forth between
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

297
“We are clearly dealing with an organization at all . . .”
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; Merrill Lynch interoffice e-mail from Todd Kaplan to Michael Costa, November 7, 2007.

297
By having their lawyers hire the expert, the banks draped a
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141. Deposition of Crane H. Kenney, former general counsel of Tribune, Chicago, IL, July 8, 2010.

297
But Tribune CFO Don Grenesko and Chandler Bigelow
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

298
At one point, the banks sounded each other out and learned that
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

302
VRC, under pressure
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

302
After much to and fro
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; Deposition of Nils Larsen, managing director, Equity Group International, July 7, 2010. Larsen told Bankruptcy Examiner Kenneth Klee that he didn't promise Bigelow the job of CFO but that he did suggest Bigelow had a good future with the new owners. “I'm sure that he would have gotten the sense from conversations with me that I thought that he was a valuable member of the team,” Larsen said.

303
“Just had a long talk with Sam. . . .”
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; JPMorgan Chase interoffice e-mail from James Lee to Jamie Dimon, December 19, 2007.

303
Lee's boss, Dimon, later
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; examiner's interview of Jamie Dimon, chairman and CEO, JPMorgan Chase, New York, NY, June 25, 2010.

303
Zell said he knew the bank
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

304
On December 20, 2007, at 12:02 p.m.
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

304
The banks wire-transferred funds to Tribune, which disbursed about
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

304
performance was off just 2 percent from its plan, the ESOP would have
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

304
But FitzSimons had reason to be even happier.
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141, and news reports in the
Chicago Tribune
and other newspapers.

305
Many of his friends in the company did well, too
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

305
On Wall Street, the banks and their advisers
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

315
the
Los Angeles Times
quoting Zell saying
Zell e-mail to author, January, 23, 2008.

317
In 2007, the
Times
generated nearly $200 million in cash flow, off
Tribune Company Form 10-K for fiscal year ended December 31, 2007 and author's recollection as recorded in his diary.

317
Zell compared the
Times
, which had survived for 126 years
Video, “Sam Zell Visits the
Los Angeles Times
,” February 7, 2008. Zell visited the
Los Angeles Times
printing facility, where he spoke with employees.

318
The whole exercise seemed like a scene out of
Video, “ Tribune Owner, Sam Zell, Says F#@k You” Visits
Orlando Sentinel
,” January 31, 2008.

318
By the time Zell and Michaels showed up
Tribune Company interoffice e-mail passed on to the author by anonymous sources, February 27, 2008.

320
Lipinksi's first doubts about Zell surfaced during
Author's interview with Ann Marie Lipinski, Chicago, IL, winter 2010.

321
Proud of his heritage as a Latino and loyal to
Author's telephone interview with George de Lama, summer 2009.

322
but she remained determined to see the
Author's interview with Ann Marie Lipinski, Chicago, IL, winter 2010.

323
Complaints of sexual harassment, crude jokes, and boorish behavior dogged Michaels
Right of the Dial: The Rise of Clear Channel and the Fall of Commercial Radio
, by Alec Foge (New York: Faber and Faber, 2008).

323
The hundred-day Tribune plan Michaels
United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.

324
In all, in less than a year, Michaels hired into senior positions
Author's telephone interview with Mary Jo Mandula, winter 2009. Mandula was the building manager at Tribune Tower.

324
Michaels' most celebrated hire was Lee Abrams
“Lee Abrams Joins Tribune as CIO,”
Arbitcast: All Things Satellite Radio
, March 11, 2008.

325
“Talk to Sam” e-mail box for employees
Transcripts of TalktoSam Messages, December 2007–February 2008. Employees were unaware that Zell's e-mail messages were sent to their supervisors.

326
forcing him to order deep budget cuts and layoffs
“Tribune Company Announces Hundreds of Job Cuts,” Associated Press, February 13, 2008. Although Zell told Tribune employees that the company could not cut its way to prosperity, he began eliminating jobs and cutting the space for news soon after he took over.

326
He commissioned jukeboxes, pinball
Author's interview with Mary Jo Mandula, winter 2009.

327
Even Kern called Lipinski and said
Author's interview with Ann Marie Lipinski, Chicago, IL, winter 2010.

328
“The Perils of Modern Journalism: Should Political . . .”
Author inspection of the sign after it had been removed from Tribune Tower.