In news that should not have surprised anyone, the Tribune Company filed for bankruptcy today. The filing, a chapter 11 variety, keeps TribCo in business and means that operational changes will be minimal. The goal of the bankruptcy declaration is to force creditors to negotiate with the company and accept less favorable terms on their debt. In many bankruptcies, the debt holders become the new owners and equity holders (prior owners) are forced out. (It is possible that Sam Zell's time at the helm of HMS TribCo is severely limited.)
While the news of Tribune's filing is not good for Cubs fans, their is a silver lining. Arguing that the team is a separate (healthy) business, TribCo excluded the club and the stadium from the filing. In a charmed world, this means the sale of the club would continue unimpeded... but a glance at the headlines this year indicates 2008 does not lend itself to the description: 'charmed world.'
The first hiccup in the sale process is likely to focus on the portion of Comcast SportsNet that was originally intended to be sold along with the club. (Without inside information, I'm not sure the following is true, but I can speculate.) The three bids that have been filed most likely included a purchase of the ComCast channel. However, the ComCast channel is included in the bankruptcy filing, so the bids received Dec. 1 are likely invalid, or in need of substantial modification. There are (at least) two scenarios in play here.
Scenario 1: The club and ballpark ("the two assets") are sold without ComCast. Either the bankruptcy judge allows the decision not to include the two assets in the bankruptcy filing to stand (possible), or the Creditors don't petition the judge to force Tribune to include the two assets in the bankruptcy filing (unlikely). Regardless, if the two assets escape the bankruptcy filing, the sale would proceed along the same timeline as planned, with the only modification being that the bidders reduce their bid by the amount of value they had previously assigned to the ComCast share.
Scenario 2: The interested parties still plan on selling the club, the ballpark, and ComCast together. If this is the case, the sale process would be delayed at by at least a few months because when an asset is subject to bankruptcy, the creditors may object to a sale if they feel that it is not valued properly. In this case, not only do the other MLB owners have a say in the sale, but so do the Tribune creditors and the bankruptcy judge.
In another related note, I can easily see MLB's antitrust exemption coming under close scrutiny because of this filing. I am predicting right now that creditors will object to today's filing. TribCo will be forced to include the club and ballpark as part of their assets in an amended filing. The sale of all three assets will then be subject to creditor approval, judicial approval, and MLB owners approval. If the MLB owners were to reject the highest bidder, the probability of the antitrust exemption being challenged by the creditors would be nearly 100% in my estimation.
Of further interest, let us also remember that the antitrust exemption is not so much an affirmative exemption as a refusal by federal courts to take jurisdiction in matters related to Major League Baseball. The exemption was established and upheld when the Supreme Court laughably decided that MLB did not participate in 'interstate commerce' and thus was not subject to federal antitrust laws. The Supreme Court indicated that Congress had the power to pass legislation and revoke this exemption, but Congress never has. However, the legal reasoning behind the case was severely flawed and the Federal courts now operate under a much broader interpretation of interstate commerce. (Counterpoint, TribCo apparently filed in Delaware state court, but its certainly possible that creditors will push for a change of venue to a federal appeals court, thus settling the jurisdiction hurdle to challenge the antitrust exemption.)
What then are my conclusions?
No one is happy tonight.
• Sam Zell might be relieved that he's likely done at the Trib, but I believe he's lost over a billion personally.
• Tribune Company employees who are fortunate enough to still be employed may have their entire Employee Stock Ownership Program wiped out (if my understanding of TribCo's capital structure is correct.)
• Cubs bidders are probably upset because this will delay the sale of the team.
• Cubs fans are upset because this will delay the sale of the team.
• Cubs management should be upset because the club will be included in the bankruptcy before long and budgets will be slashed accordingly.
• Bud Selig and the MLB owners are upset because there's now another viable avenue to attack the antitrust exemption, plus they're really going to be pissed that one of their club members is going to be in bankruptcy court.
• Don Fehr and the players union are uneasy because in the nightmare situation, the club is included in the bankruptcy filing and all of the players' contracts could possibly be declared null and void.
Byron Clarke is a CPA with no detailed knowledge of bankruptcy laws, legal jurisdictions, or the Tribune Company's specific situation. He is, however, a baseball hobbyist who finds the business of baseball thoroughly interesting and has generally followed baseball business proceedings in the media. Everything above was pure speculation. If you want to read an actual piece of journalism about the bankruptcy filing, check out the NYTimes.
ESPN is reporting that three people have submitted bids for the second round of the Cubs sale. My impression is that there's still time and more may continue their pursuit, but one guy who hasn't yet submitted is Mark Cuban.
Cuban, as you may remember, was recently outed for having allegedly committed insider trading in order to save a cool 130 mil. ...wait, it was for like 130 thou? Not 130 mil?
(insert stare of awe and befuddlement here)
Anyway, the Tribune was originally poised to sell 95% interest in the team team for more than a billion dollars, but since the only organisation tossing around the "b" word these days is the US Government, the Cubs may now be had for fewer shares and fewer dollars. (Although it would be pretty funny if one of the companies getting bailed out turned around and bought the Cubs. Hey, at least you'd know they were good for the money. C*cks*ckers.)
Somebody in Venezuela's gonna pay
As Colin mentioned, the scariest catcher in baseball lost a brother today. We've all heard stories about how tremendously dangerous South America is, and that is apparently even true for a badass-looking guy like Henry Blanco.
Rumors have not been confirmed that the kidnappers changed their gameplan upon learning that Carlos Zambrano was loading Blanco up with guns while planning a jungle attack Rambo Style (and a Zambo photoshop might make sense someday).
But in all seriousness, this is an unnecessary reminder that we live in a really crappy world. Bad things happen to people - not just good people, but people in general. All Henry Blanco did was earn a lot of money playing a child's sport, and he's lost a brother because of it. But at least we understand the cause of this one - there are so many acts of aggression and brutality with no understandable justification that it is sickening.
I know a guy who runs what can only be described as the single greatest smoked meat deli I've ever eaten at. He's a nice guy. Even though he's become one of the most popular faces of Toronto cuisine, he'll still sit with the regulars at his deli and shoot the breeze with them for 10 minutes if time is permitting. A few weeks ago he told me, "I think that things tend to work out in the end." Well, that just isn't the case. There are a lot of people in the world who die for nothing every single year, and I'm talking more people than the city of Chicago, more people than the State of Illinois, more people than is conceivable. Stop for a minute and think about that the next time you're in Chicago - imagine if everybody, from the commuters on the train to the fans at the park to the people in the offices to the drunks in the bar were all ruthlessly, brutally killed for what amounts to somebody else's desire for a little more money and power. It's a sickening thought and it happens every single day.
But now I'll get off my pulpit. It was only two paragraphs of seriousness, but they were big paragraphs. Tomorrow, we'll make more fun of funny things. I promise.
Of the 10 groups approved to bid for the Cubs by Major League Baseball, only those that bid $1 billion or more for the team, its home ballpark Wrigley Field and a stake in a regional sports TV network advanced to the next round, said two sources, who asked not to be identified because the process is ongoing.
While Tribune and baseball officials declined to comment, three sources said Internet billionaire Mark Cuban, owner of the National Basketball Association Dallas Mavericks; and a publicly held group led by New York City taxi tycoon Andrew Murstein were among those advancing.
Others advancing included Tom Ricketts, chief executive of Incapital LLC, a Chicago securities and investment banking firm, and son of the founder of TD Ameritrade Holding Corp; and a group headed by Michael Tokarz, chairman of MVC Capital Inc, one of the sources said. The Tokarz group includes Fred Malek, who previously bid on the baseball team in Washington.
Among those eliminated was John Canning Jr., chairman of Chicago private equity firm Madison Dearborn Partners, one of the sources said. He was an early favorite to win the bidding because of his close ties to baseball commissioner Bud Selig. … Don Levin, owner of the Chicago Wolves minor league hockey team, also confirmed he had been eliminated from the process after bidding under $1 billion. "What they said to me was that other people were in a completely different zip code," he said of the bidding.
Cuban and Ricketts I’ve heard of. I’d heard of Canning and Levin as well, but apparently they’re not in the picture anymore. (Although the Tribune last night hinted that Canning might find his way back into the bidding.) I’ll do some more looking into these folks and get back to you.
Some quick notes.
Ted Lilly got a quality start tonight, which probably would have warmed the heart of Jerome Holtzman, who invented the stat. Holtzman, a long-time fixture in the Chicago baseball press, died over the weekend. Bruce Miles has a touching tribute.
Yeah, a lot of guys raise their strikeout rate and cut their walk rate when they get promoted to AAA. Happens ALL the time.
A group led by John Canning, chairman of Chicago private-equity firm Madison Dearborn, valued the Cubs, Wrigley and the team's stake in Comcast SportsNet at far less than the $1 billion or more that the four or five groups team owner Tribune Co. deemed satisfactory to continue, a source with knowledge of the process said.
But Tribune Co., which also owns the Chicago Tribune, appeared to be serving notice in shooting down the lowball offer. The source indicated that the most important figures connected with any offer will be the ones with dollar signs, in order to maintain the integrity of the process and the media concern's fiduciary responsibilities.
Of the five to 10 offers fielded for just Wrigley Field, the source said three were deemed promising enough to be asked to continue in the process.
Expect to hear more on this in the coming days. Meanwhile, MLB doesn’t seem to be happy with the Cubs’ draft:
The Cubs' fine for violations related to the June draft of first-year players was a whopping $500,000, SI.com has learned. Major League Baseball ruled that the Cubs violated a couple of baseball rules, including failing to report a signing to MLB's New York offices and putting the player on the field before receiving approval for the signing from MLB offices. The Cubs were said by people familiar with the case to have exacerbated the situation by how they responded to MLB's concerns.
This is the sort of thing that just wouldn’t have happened under the watch of Andy MacPhail, who came from a long line of distinguished baseball statesmen and who played ball with the commissioner. I personally am comforted by the thought of a front office who cares more about what’s best for the team and less about what’s best for the league.