Poor Sam Zell. You bought the Tribune Co., which includes the Cubs, and now you’re running around trying to get some cash in-hand to make the payments on your new toy. I know you’ve seen that ad. The one where the lady answers the phone from the collection agency asking, “Is everything OK?” Well, welcome to the high-stakes, big money production.
Zell’s looking like a man running from pawn shop to pawn shop unloading his wares before the repo man comes along and snatches up his possessions. That’s what happens when you take a huge publishing company, all its holdings, and decide to take it private.
Case in point, the Cubs.
Zell is looking to unload the Cubs, Wrigley Field, a 25 percent stake in Comcast SportsNet Chicago, and Wrigley Field Premium Tickets, and he can’t do this fast enough. While I was joking about the repo man, he does have the small matter of a $650 million debt payment obligation due in December, and according to Phil Rosenthal, “about $250 million in medium-term notes due in 2008. The plan is to satisfy those obligations by drawing down a line of credit.” So, selling off assets he’s uninterested in keeping (that’s you, Chicago Cubs) to get some green in-hand is the first order of business.
And while it’s certainly no JK Rowling tome, the would-be owners of the Cubs have been waiting with baited breath for the “financial books” on the Cubs so that the process of completing the sale can proceed.
What’s been the hang up on the books? The protracted deal that Zell has been in with the State of Illinois to break Wrigley Field off as a separate transaction from the Cubs. Zell’s logic is he can get more in-total with the two detached, than keeping them together, no matter the discontent it must be causing MLB.
Zell is finally making good on getting the books to the bidders for the Cubs, as revealed in a conference call to creditors yesterday saying it should be delivered in about 10 days.
"We're trying to do what is the optimum transaction with the Illinois Sports Authority while simultaneously running with a book on the Cubs going both ways, with or without the sports authority."
No matter how lofty the notion is, Zell believes the deal to sell off the baseball holdings should be done "sometime this year."
That doesn’t mean before the end of the season, mind you.
It took 18 months for the sale of the MLB-owned Expos/Nationals to the Lerner family. Zell is expecting one of baseball’s most storied franchises to be sold and turned around before that $650 million early December bill comes due.
Maybe. Maybe not.
The forced divorce of Wrigley Field from the Cubs is a glaring negative for any potential owner. If the Illinois Sports Facility Authority does purchase Wrigley, the plans are to do a naming rights deal, and use rent payments from the new owners to pay approx. $450 million in construction bonds need to spruce up Wrigley beyond its current aging state.
That may be good for the ISFA, but it’s a punch in the gut for ownership of the Cubs.
Think about it. The owners will be paying for upgrades to Wrigley without owning the asset. In layman’s terms, it’s like renting a home, and seeing your money getting used to make improvements to it, but you don’t see the benefits when it’s time to move out.
Bidders, of course, will be interested either way. It’s the Cubs, for heaven sake. Even in the downturned economy, owning the Cubs is one heck of a bragging right.
While there will certainly be talk of all the bidders having a shot at buying the Cubs (yes, Mark Cuban has been mentioned, as has bond dealer Thomas Ricketts and others), the not-so-transparent leaning is to John A. Canning, Jr., Chairman of Madison Dearborn Partners, a private equity investment firm specializing in management buyouts and investments in the industry sector. Canning was once a minority owner of the Brewers when Bud Selig owned the team, and is still considered a close friend. Just last week, Selig was at a dinner honoring Canning. How cozy is that? How easy would it be for MLB to make the selection?
Still, this is MLB we’re talking about, an organization that moves at a glacial pace, and certainly not one that likes being told to move on someone else’s schedule.
Zell, you may not get your wish of having the sale done by the end of the year.
However, it needs to happen, sooner rather than later. Let’s get the show on the road, stupidity of decoupling Wrigley from the Cubs. Stupidity of a possible naming rights deal for Wrigley. Whoever winds up holding the keys can certainly do better than the lame duck that Zell is. The longer this drags out, the more it impacts the Cubs adversely. So far, that hasn’t been the case. But then, Zell could be holding a yard sale shortly, given the mountain of debt he’s under. Maybe Zell could play the part of Crazy Eddie, the "Darth Vader of Capitalism" and run ads on late night TV. Bud, please… let’s get the show on the road.
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