Tribune sale at issue as newspaper woes mount

The Zell Deal is facing trouble according to some Wall Street experts who wonder if the deal could fall apart in the middle of the industry's accelerating decline.

If the deal gets done, Tribune's $13 billion debt load will be carried mostly by the employee stock ownership plan. In a just-released AP story:

Tribune, which reports second-quarter results on Wednesday, already has borrowed $7 billion to finance the first step of the transaction and buy back shares but had to commit to repaying $1.5 billion of it in two years in order to secure the loan. Once the deal wins approval from shareholders and federal regulators -- far from guaranteed -- it must borrow an additional $4.2 billion to buy all remaining shares not owned by the ESOP.

Tribune says it's financing commitments are secure and it is comfortable with the terms of the current financing arrangement.

But employees of the struggling dailies, in particular, have cause for more worry after enduring a turbulent period of cutbacks and change as advertising revenue slumped and readers migrate to the Internet.

"Everyone is concerned," said Michael Hill, a reporter for the Tribune-owned Baltimore Sun and unit chair of the Washington-Baltimore Newspaper Guild. "We're very worried that the debt payment this new deal requires means that they're going to keep cutting to try to make those numbers."

Employees are asking: what happens if the merger isn't completed?

"Tribune would remain a public company, with the ESOP and Sam Zell continuing as shareholders of the company," the company said in a written Q&A recently. "Tribune still will have returned a substantial amount of capital to shareholders. We would expect our board to consist of the same directors we have today, including Zell."

Yeah, but will employees get their 401(k) match back?