The Reporting Expands

So, on Friday, the Trib stock tanked $1.41 falling to an approximate 8 year low. The next day, the Tribune not only acknowledged the rumors the Cubs are for sale, but addressed them head on.

In response to renewed speculation this week that Tribune may look to sell its high-profile asset, the Chicago Cubs, the company said Friday it was not parting with the baseball team.

"The Cubs are not for sale," said Gary Weitman, a Tribune spokesman.

Why should they be for sale? It's not like the Cubs need cash quick and they'd rather have the long term cash flows from the Cubs profits, right?

Oh, wait...

Last autumn, for example, a federal tax court ordered Tribune to pay $1 billion in back taxes and interest after the company lost a tax dispute that it inherited through its acquisition of Times Mirror Co. in 2000.

Tribune, which owns the Chicago Tribune, borrowed several hundred million dollars to help pay the tax bill. Moody's said it expects the newspaper industry's fundamentals to remain weak "for the foreseeable future."

The debt-rating firm said its review will focus in part on whether Tribune can maintain the financial performance measures appropriate to its current relatively strong A3 debt rating.

Moody's also said it was considering reducing the debt rating on Tribune rival New York Times Co.

Dunno how many of you understand what a Moody's downgrade does to a corporation, so I'll explain. When Moody's or any other major credit rating agency (Standard & Poors) changes a debt rating, the interest rate a company has to pay on its debt changes as well. The relationship between interest rate and credit grade is inverse.

In other words, a credit downgrade results in an increase in costs to a company.

So, here's what we have. Moody's is reviewing the Trib, and not just a normal review, but "review for possible downgrade." This means, unless something changes quickly, the debt is being downgraded. Given industry fundamentals will remain weak for the near term, there's very little to create a fast change in Trib's debt structure.

Also, the #4 shareholder, Ariel Capital, wants the Trib to sell the Cubs.

Lastly, we have this from the article:

Tribune's travails had spawned rumors last autumn that the company might sell the Cubs as a way to raise cash.

But the rumors faded over the winter before resurfacing this week.

Tribune bought the Cubs in 1981 for $20.5 million. The team's value now has been estimated to be more than $500 million.

What do we know about Trib leaks? They always leak their long term plans in the press so as to desensitize an issue. That means the Trib just had their reporter place the price at which they will sell the team in their own paper. Ignore the little spokesman they sent out. That's just S.O.P. Were they to say the Cubs were for sale, that's would be chum for the sharks.

The only question left in my mind about the Cubs being sold is tied to the probable downgrade. Will they sell the Cubs before the downgrade in order to pay off $500 million in debt and stave off the downgrade?

Or, will they avoid the reduced price a rapid sale would fetch, eat the downgrade, sell the team in 12 to 18 months, and then pay down debt and have the credit agencies re-review?

A great day is coming, Cub fans. The Cubs are going to get a new owner. That new owner could be better or worse. But the new owner also offers something currently unavailable.

Hope. Real, positive, hope.