LA Times cutbacks, papers for sale, and other speculation

I'm told a memo was circulated this weekend among Los Angeles Times staffers asking for volunteers to take buyouts as a way to lessen or avoid layoffs at the paper.

The Chicago Tribune, the Times's sister paper, laid off 20 people on Friday, "many of them" from the newsroom, WBEZ reported.

Times employees are in a state of anxiety, as LA Observed pointed out last week, as rumors of layoffs swirl amid continued efforts by owner Tribune Co. to crawl out of bankruptcy. Investors are impatient and layoffs are a quick way to improve the financial picture in the short term.

So, is this about boosting profits and satisfying debt holders? Or should we believe the Wall Street Journal's speculation that the Times could be being readied for sale - with a smaller payroll making for a more attractive sales price?

And since we're speculating... Could the Tribune be raising cash as a way to up its bid for the Orange County Register? The Register's publisher announced Friday that he'll at the end of September, which would indicate a deal is in the works. MediaNews Group had emerged as the top bidder for the paper, but negotiations broke down last month. This was followed by a flurry of layoffs in MediaNews's Southern California newspapers - a sign the chain is looking to up its ante.

Another Tribune Co. exec bails out

Tribune Co. COO Gerry Spector announced he is leaving after three years on the job, the Chicago Tribune's Tower Ticker blog reports. Spector's departure appears to be part of the de-Zellification of Tribune, as part of a deal to dig the company out of bankruptcy.

From the Tower Ticker:

Spector's decision to leave at the end of the year was announced Tuesday by the four-man executive council  to whom he has been reporting since October's resignation of Randy Michaels as chief executive of the parent of the Chicago Tribune and other media properties.

 -snip-

Spector, 63, who first allied with [Sam] Zell as a 25-year-old accountant, held senior management roles in a number of Zell's ventures and played a critical role in building his property management company from scratch.  He first became an officer of Equity Financial and Management in 1973.

Like his boss, Spector is a motorcycle enthusiast who traveled the globe as a member of Zell's Angels. A graduate of Roosevelt University and Senn High School, Spector spurned suits and ties for a colorful collection of sweaters but generally maintained a much lower profile than either Zell or Michaels.

(found via FishbowlLA)

Four in the morning

1. A welcome respite from the Larry King love fest: "As refreshing as it has been that King generally checked his politics at the door, it also happens that he sometimes left his brain there too." LAT (via LA Observed)

2. The deal that gave the Tribune Co. to Sam Zell, and landed the company in bankruptcy, also made many executive rich(er). The Chicago Reader got a list - and points out that the bankruptcy court might claw back some or all of it. Chicago Reader

3. The whitewashed wall at MOCA that the LA Downtown News first reported on is finally starting to get the attention it deserves. fishbowlLA

4. The Rolling Stone website is no longer a complete mess. fishbowlLA

Los Angeles controlling

As a consequence of the changes made in the Tribune Co. bankruptcy case, the Washington bureau of the Los Angeles Times will once again be controlled by the Los Angeles Times, LA Observed reports. When Sam Zell took over the paper, the huge Times bureau merged with the smaller Chicago Tribune's bureau, and much of the editorial control was handed to the Chicago bosses. In the two years since, many of the Times' most experienced reporters abandoned ship, leaving a much smaller bureau in DC to serve the Tribune chain.

Zell to go

The news was forecast more than a year ago: Sam Zell will leave Tribune Co. once it emerges from bankruptcy proceedings. The Wall Street Journal reports that Zell told CNBC, "I think when we're done with the bankruptcy process I will turn it over to whoever the creditors decide they want to run it, and wish them a lot of good luck."

That Zell is leaving on his own volition is one way of looking at it. Another way is that the creditors are going to strip him of his financial stake in the company, which is what gave him control over Tribune, and send him on his way.

Tribune CEO Randy Michaels could be out of a job tomorrow

The firestorm surrounding Tribune Co. CEO Randy Michaels in recent days is what happens when your days are numbered and your supposed friends and colleagues become sources for a piece like this.

Whatever one thinks of the New York Times story that portrayed the Tribune executive suite as a low-rent frat house full of aging radio execs who think locker room chat is a form of creative enterprise, it should come as no surprise that Michaels would soon be shown the door. After all, little of the information in the story was new - its just that no insiders had felt the need to help the Times connect the dots. Until now.

And so the other shoe drops:

The board of directors of the Tribune Company is expected to ask Tuesday for the resignation of Randy Michaels, the controversial chief executive of the company, according to a person directly involved in the matter.

The individual, who spoke on the condition of not being identified, said the board had lost confidence in the ability of Mr. Michaels to lead the troubled company. 

Mr. Michael’s resignation would follow by days the exit of another top executive at the media company, Lee Abrams, Tribune’s chief innovation officer, who resigned on Friday after sending a sexually explicit memo to the entire company. 

All of this comes ahead of Tribune's expected emergence from nearly two years of often contentious bankruptcy proceedings. Michaels, who was brought in by company owner Sam Zell, would likely be out of a job even if it weren't for the bad press; especially since Zell himself will probably lose his stake in the company as part of the bankruptcy deal. The bad press about Michaels just adds momentum.

NY magazine can think of 13 reasons to dislike the Zell/Michaels era

Some are new (to me), some are old. The list includes radio stunts:

Radio stunts, like CA$H GRABS ("in which a viewer was led into a bank vault and allowed to scoop up dollar bills," sometimes cheered on by Hooters waitresses) were inserted into evening news broadcasts at member TV stations.

 And bonuses:

...the top level cronies of Zell and CEO Randy Michaels (he hired about twenty top managers from his former days as a radio manager and shock jock) received a total of $57.3 million in bonuses going into 2010. The previous year they only made $5.9 million in bonuses. 

There are 11 more, as you might have guessed.

Zell is still a billionaire

"Property baron" Sam Zell, owner of the bankrupt Tribune Co. empire, is worth $4.4 billion, according to Forbes magazine, which lists his ties to the media company as a "sore spot." He comes in at #237 in the Forbes 400 richest people in the world.

Everyone wants a piece of Sam

Tribune Co.'s unsecured creditors want to sue Sam Zell and the company's board of directors over the 2007 deal that gave Zell ownership of the company - and later landed Tribune in bankruptcy court. AP

Four today

1. Even if Sam Zell bankrupted the Tribune Co. employees' retirement fund, he doesn't have to pay for it. Bloomberg (via LA Observed)

2. It was not "Bring Your Rifles To Work" day at the Attleboro Sun Chronicle. Providence Journal (via Romenesko)

3. Health insurance flack fights back against Gannett stories on executive compensation. (N.J.) Daily Journal

4. Stan retires. KTLA

Trib execs accused of pushing bad deal

The court examiner appointed to analyze Sam Zell's leveraged takeover of Tribune Co. has pieced together through "a tangle of e-mails, documents and recollections" a report that purports to show former and current Tribune executives used flawed revenue projections to push a through deal that was doomed to failure.

From the Trib-owned Chicago Tribune:

The densely-packed pages show participants on all sides of the deal trying to explain how a transaction weighed down by almost $13 billion in debt could unfold amid ample evidence of a collapsing economy and the steady erosion of the advertising dollars Tribune Co. thrived on.

Although only confidence flowed from deal participants in 2007, the report shows that what held the complex, two-stage transaction together was mostly fear of getting sued if it fell apart. The banks that had agreed to finance the deal wanted out, the documents show, and in the offices of Sam Zell, the Chicago real estate magnate who orchestrated the LBO, debate ensued over whether to bail.

Desperate to unload nearly $13 billion of debt, Trib execs, with the assistance of a small valuation firm, relied on anomalous revenue projections to prove the deal would survive under its own weight. The examiner takes particular umbrage at the decision to toss a final $3.6 billion of debt on top of the load even as the economy headed toward recession and newspaper advertising dollars disappeared. The deal went through, the Tribune Co. spiraled into bankruptcy, and the deal-makers shrugged.

Possible fraud in Tribune takeover, court examiner says

A court-appointed examiner in the Tribune Co. bankruptcy case has concluded that "the company's 2007 leveraged buyout was 'marred' by the 'dishonesty and lack of candor' of its then-senior management and that the deal rendered the media conglomerate insolvent from the moment the two-step transaction closed," the Chicago Tribune reports.

In response, Tribune Co. CEO Randy Michaels issued a memo that asks all company employees to "stay focused" and to "try not to be distracted by the media attention it may receive."

Can he say "f*&k you" in a deposition?

Sam Zell is scheduled to be deposed on June 28 in the Tribune Co.'s never-ending bankruptcy case, the blog ProtectConsumerJustice.org reports.

Noted: Eric Bailey Scott Martelle, who was cut from the Los Angeles Times just months before Tribune filed for bankruptcy, authored the post.

To get out of bankruptcy, ignore how you got in

Charges that Sam Zell knew his highly leveraged deal to takeover of Tribune Co. would force the company into bankruptcy, known as a "fraudulent conveyance," could be wiped clean by another deal to get the company out of bankruptcy.

From Bloomberg:

Tribune Co. will ask creditors to vote to settle allegations Chairman Sam Zell and company lenders violated bankruptcy law and left it insolvent when they organized a 2007 buyout that took the publisher private.

As part of its effort to exit bankruptcy, Tribune will send its reorganization proposal to creditors for a vote. The reorganization is built on a proposal to settle claims by lower- ranking creditors that the buyout was a fraudulent transfer because it increased Tribune’s debt by about $8.3 billion and only benefitted Zell and company shareholders.

“We feel pretty good about what will happen at the ballot box,” Tribune attorney James Conlan said in court today.

The rest of the story is here.

The secret lives of private jets

ProPublica got its hands on a list of privately owned corporate jets that were kept off the government's air-traffic tracking system and so could not be tracked by the public. The list includes jets owned by several newspaper companies:

Owners of newspapers that have fought for access to public records, including Journal Enterprises, owner of the Albuquerque Journal, and Sam Zell, chairman of the Tribune Co., which owns the Los Angeles Times and the Chicago Tribune.

Journal Enterprises told ProPublica it would take its plane off the list. Sam Zell's Tribune Co. declined to comment.

Gannett, which owns USA Today, also owns a blocked jet. USA Today ran a version of the ProPublica story and included this fact in the article.

(found via Romenesko)

Tribune Co. bankruptcy update

The U.S. trustee's office has ordered an investigation into claims that the deal Sam Zell crafted to purchase Tribune Co. amounts to a "fraudulent conveyance" because it put the company on an inevitable path to Chapter 11 bankruptcy.

Tribune owns the Los Angeles Times and Chicago Tribune, among other papers.

Employee lawsuit against Sam Zell moves ahead

A federal judge has ruled that a lawsuit filed by current and former Los Angeles Times employees against Tribune Co. chairman Sam Zell can move ahead. The suit alleges Zell "diminished the value of the employee-owned company to benefit himself and his fellow board members."

Irony

As the one-year anniversary of Tribune Co.'s Chapter 11 bankruptcy filing approaches, company owner Sam Zell has some advice for the government about debt.

From CNBC:

The US government will have to cut down on borrowing by giving up on some publicly-financed programs or face inflation in one or two years, Sam Zell, chairman of Equity Group Investment, told CNBC Tuesday.

"I do believe that the current administration is insensitive to the risks of the scale of debt we're creating," Zell told "Squawk Box."

If things do not change, it is "very hard to imagine" that the US is not going to be confronted with inflation in one or two years, he said.

Zell sees his shadow

The Tribune Co. filed a motion on Friday asking for an extension of the time it has the exclusive right to negotiate its Chapter 11 bankruptcy. According to the motion, the company expects to remain bankrupt for another six months, until end of May 2010.

Here's a portion of the memo Tribune executive Randy Michaels and Gerry Spector sent to employees:

The exclusivity motion makes it clear that we’ve accomplished a lot as a company. With your help, we have stabilized and repositioned our businesses, exceeding the financial results of most of our newspaper and broadcasting peers. This year we project operating cash flow of approximately $400 million—nearly double our original operating plan. ...

Today’s motions will generate some media attention. Try to tune out the noise and focus on your job. The fourth quarter is traditionally the strongest one of the year and, with your continued hard work, we're sure this year will be no different.

The filing did in fact attract some media attention. Here's how the Tribune-owned Chicago Tribune led its story:

Signaling that infighting among creditors is bogging down reorganization efforts, Tribune Co. has asked a U.S. Bankruptcy Court in Delaware to give its management team until March 31 to craft a plan to exit Chapter 11 without interference from other parties.

Trimming paper to trim costs

Ed Padgett at the LA Times Pressmens' blog reported yesterday that the Los Angeles Times will once again trim the width of the paper to cut costs:

As the Los Angeles Times continues to seek ways to remain in the black the newspaper will trim an additional four inches from the width of the newspaper. Readers will note a one-inch reduction in the width of the newspaper immediately, which will save the newspaper millions of dollars from the expense of producing the newspaper in saved newsprint costs.

Any further reduction in newsprint width down the road may result in the Los Angeles Times reverting to the tabloid format.