Tribune Deal Never Should Have Happened, Bankruptcy Court Finds

Tribune headquarters.

The Chicago Tribune reports that A new trove of documents in the Tribune Co. bankruptcy case shows former and current executives used overly optimistic projections and an investment's bank's stamp of approval to allow a group led by Sam Zell to buy the company even though it was almost immediately insolvent.

Tribune Co. owns The Los Angeles Times.

The company and executives involved disagree with the conclusions.

But read this astounding passage:

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 (leveraged buyout), debate ensued over whether to bail.

Even for those not expert in the arcane leveraged financing of the likes of Zell, the red flags, primarily the collapsing advertising economy, were everywhere.

This New Yorker profile of Zell was filled with portents.