ESOPS Likely to Suffer First in Tribune Bankruptcy

Graph_down Chicago is NOT the place to be these days (of course people from Milwaukee already know that) — especially if you are a corrupt politician or a financially-stressed newspaper. On the newspaper side of things — Elizabeth Dale (Florida) writes to tell us that the ESOP angle of the The Tribune Company bankruptcy is truly a mess.

She points us to this story from the New York Times Deal Book:

The possibility of a bankruptcy filing at Tribune Company is an embarrassing development for Samuel Zell, the real-estate mogul who took the media company private last December.

But it is likely that Tribune’s employees — or, more specifically, the employees’ stock-ownership plan — would take the first hit.

Because of the unusual structure of Tribune’s $8 billion buyout, Tribune’s employee stock-ownership plan holds 100 percent of Tribune’s common equity, regulatory filings show. Common stockholders are generally the first to take a loss in a bankruptcy restructuring, and they usually recover next to nothing.

Mr. Zell, by contrast, supplied mostly debt in the complex transaction, putting him higher in line to get paid. His $315 million investment in the Tribune deal consisted of a $225 million promissory note; the rest was for warrants to buy about 40 percent of Tribune’s stock in the future.

Great, another self-centered corporate CEO looking out for himself and screwing the employees of his company. I guess we should be thankful that at least he is not asking for a bail out.

More about this story here.

Cross posted at Workplace Prof Blog.

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Hope for the Milwaukee Transportation Money?

Earlier this semester, our Distinguished Fellow in Law and Public Policy, Mike Gousha, held an “On the Issues” session with Milwaukee County Executive Scott Walker and Milwaukee Mayor Tom Barrett regarding how to spend the $91.5 million in federal funds earmarked for transportation needs in the region. A brief history on the money: More than seventeen years ago, the federal government set aside $91.5 million to be used for transportation projects in the Milwaukee region. Since that time, the City and County of Milwaukee have been unable to reach an agreement as to how to use those dollars. As a result, the $91.5 has sat unused — earning no interest to boot.

As part of my Legislation class, I required my students to attend some of the “On the Issues” programs this semester (as an aside, Gousha and his programs are an inimitable complement to the teaching and scholarship engaged in at the Law School — more on that perhaps some other time). One of my students emailed me recently pointing out that under President-elect Obama’s public works economic stimulus plan, states that do not expediently invest their federal highway and transportation money will lose it (the classic “use it or lose it” approach). Another sidebar here: It warms a professor’s heart to receive such emails and see his/her pedagogical theories validated, at least to some degree.

My student went on to point out that the partisan bickering between Walker and Barrett — indeed, the seemingly intransigent positions that have been staked out (see webcast and post) — may lead to the region losing a significant sum of money that could be used not only for transportation needs, but also for infusing some much-needed money into the local economy.

Last month, student guest blogger Andrew Golden posted about the issue of partisanship and whether it is a “poli-ticking time bomb.” Let’s hope that our local political leaders can end nearly two decades of political, if not partisan, bickering and find a productive and sensible way to use these federal dollars before they disappear.

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First Among Equals

The U.S. Court of Appeals for the D.C. Circuit is widely seen as the “first among equals” of the U.S. circuit courts. It is the most prominent, it deals with the biggest cases, and its opinions are most highly regarded. This need not necessarily be the case. During the time that Learned Hand (left) and his cousin Augustus sat on the Second Circuit, for instance, the Second Circuit was the most prominent in the land. When the U.S. Supreme Court failed to assemble a quorum to hear an important antitrust case, the Court chose to certify the case to a panel of the Second Circuit for final resolution. Learned Hand authored a significant antitrust decision for the panel in the case (148 F.2d 416), and their power of mandamus was later upheld by the Supreme Court (334 U.S. 258). I have heard it argued that the Ninth Circuit is on the rise to the point where it may soon displace the D.C. Circuit as the most prominent court below the Supreme Court.

I mention all of this to ask the simple question, prompted by yesterday’s indictment of Governor Blagojevich: Is the Northern District of Illinois the new Southern District of New York? Traditionally, SDNY, as it’s known in the case cites, has been the most prominent of the federal district courts. For instance, Rudy Giuliani left his post as the associate attorney general, number three at Department of Justice, to become U.S. Attorney for the Southern District of New York.

But with Patrick Fitzgerald running the Northern District of Illinois, that seems to be the home of many major cases. 

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