Houlihan Lokey and Tribune Company
September 14th, 2010Although this news is a bit dated by now (originally published on August 3rd), I still think the message is relevant, …and telling (see Houlihan Lokey Declined to Endorse Tribune LBO).
Apparently, Houlihan Lokey had been approached by Sam Zell to render a solvency opinion of his planned LBO in March of 2007. Houlihan declined. According to Reuters:
Investment bank Houlihan Lokey had declined to endorse Sam Zell’s $8.2 billion leveraged buyout of Tribune Co, citing the deal would saddle the media conglomerate with too much debt, the Wall Street Journal said, citing people familiar with the matter.
Houlihan Lokey rejected overtures from Tribune around March 2007 to provide a solvency opinion labelling Zell’s takeover financially sound, the people told the paper.
Houlihan believed the deal would saddle the newspaper and television company with too much debt, the Journal said.
For those of you who follow this blog, you know my general opinion of the deals that were consummated during the go-go M&A wave between 2005 and 2007. In short, I thought many of the deals were overpriced and over-leveraged (see The Future of Corporate Performance, Dumbfounded by the Data, and Stupid Money Chasing Stupid Deals for background).
In one of those posts, I singled out the Tribune Company as an example of a misguided, over-leveraged deal (see also Tribune Company Bankruptcy). In June of 2007 I wrote:
…I’ll be interested to see how a firm like The Tribune Company, under the leadership of Sam Zell, will be able to pay off its debt – at 10.7 times earnings – in a business (newspapers) where cash flows have been steadily declining.
Nice to learn I wasn’t the only one worried about the solvency of that deal deal, …although I’m sure that’s no comfort Tribune’s creditors, who probably would have liked to have known about Houlihan’s abstention in the matter.
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