In a hedge fund's bid for Tribune's newspapers, a hidden risk lurks in the fine print

[TexasTowelie]

In its bid to acquire Tribune Publishing, the hedge fund Alden Global Capital vowed to provide $375 million in cash to the owner of the Chicago Tribune, the Baltimore Sun and other titles — a theoretically welcome influx to an investment-starved newspaper chain.

But industry and financial experts have looked at the fine print and see something starkly different: Alden, they say, has already signaled it plans to saddle Tribune with debt that could further hollow out the company, and it may not have $375 million available to begin with.

Alden has made the certainty of its finances a central part of its push to acquire Tribune, saying in a December letter that it “can fully finance the Transaction with cash on hand” and “we will have no financing conditions and will not require third party debt or equity to finance the Transaction.”

-snip-

But the deal includes a brief but potentially critical passage saying Alden “has the right to seek to finance a portion or all of the $375,000,000 in cash with the proceeds from debt and/or equity financing from its affiliates or third parties.”

“That means they’re going to try to borrow money,” Arthur said. He said it would not surprise him to see Alden borrow heavily against Tribune’s revenue and put in as little of its own money as possible.

Read more: https://www.washingtonpost.com/business/2021/05/06/alden-tribune-hidden-risk/

[TreasonousBastard]

1. This is becoming an old trick and will probably the end of Tribune Cos...

The only people a hedge fund gives a shit about are certain stockholders and its own profiteers. So, find a company like Tribune who's stockholders would like a way out, but with few takers. Offer it a dirt cheap price to shut up its owners and when you buy it, saddle it with all the debt you can find to pay for it. Transferring a bunch of your own debt to the new acquisition makes the deal even sweeter. Engineer it so bankruptcy won't touch your money.

The last thing a fund wants to do is actually run a company-- that means work and risk. Nope, the only people you want to deal with are tax accountants and lawyers. No leases or needy employees, no complaining customers who actually want the stuff you really don't want to bother with selling to them...

Worked lout fine for some people with outfits like Sears, ToysRUs, A&P. and a bunch of others. Everyone made out fine except employees, customers, suppliers, and, well, the rest of the country.

The fun money is while loading up the skeleton with debt, you sell off any valuable parts and pocket the cash yourself. Look for who got the cash when Sears sold off Craftsman tools.

I don't have an answer for this chicanery, except maybe to just tax the funds out of existence. These aren't the mutual funds your grandparents' retirement money is tied up in-- they are simply tax scams for the wealthy.

American business at its finest-- let the Chinese and Koreans make the shit we need or want while we just play with Monopoly money.

[True Dough]

2. Good post

This puts it into context. Chicanery indeed!