Market up sharply: Better home sales numbers and a possible breakthrough involving those British sailors in Iran are a couple of the explanations. The Dow is up 125 points after 90 minutes of trading. Bloomberg
Tribune story: All kinds of coverage, as you can imagine, but much of it just recapping familiar ground: the tortuous auction process, the money-grubbing Chandlers, the pros and cons of employee stock ownership plans, the colorful and unorthodox Sam Zell, etc. There's lots of moaning and groaning at the LAT, but that also is getting a little stale. (Newsroom cuts involving 50 or more positions are likely to be announced soon.) Zell didn't do interviews yesterday, leaving Tribune CEO Dennis FitzSimons to be the deal's main cheerleader. He'll be staying on as CEO and other senior managers appear to be safe - at least until the deal closes and the dust clears. After that, who knows? Some other interesting nuggets:
--The new company structure depends on the creation of an S Corp. ESOP, which eliminates most of the corporate taxes Tribune would otherwise pay. That boosts cash flow and allows the company to support a heavier debt load. For the first 10 years of an S Corp. ESOP, the company has to pay capital-gains taxes on asset sales, which is a huge incentive to keeping Tribune intact. Chicago Tribune
--Zell's projections show the company paying down a large share of the debt within 10 years, according to the Chicago Tribune. But that will depend on maintaining cash flow. "According to Standard & Poors, the company's new debt load will be 10.7 times its $1.4 billion in 2006 cash flow," the paper reported. "That's about twice the level of the next most leveraged company in the newspaper industry, which explains why the major bond rating agencies downgraded Tribune's debt Monday." FitzSimons said that "iIf we get the cash flow to go up just a little bit - or even if it stays flat - the returns will be huge."
--There's very little intelligence on the prospects for more cost-cutting. The WSJ says that someone who has spoken to Zell about his plans says he is likely to seek further budget cuts, but no details. It's a pretty good bet Zell himself doesn't know what he'll do.
Gas prices keep soaring: The latest government survey shows that an avergae gallon of self-serve regular in the L.A. area is $3.22, up from $2.75 on Feb. 26. Higher oil prices are one explanation, of course, but another factor could be a 16 percent increase in the number of personal and commercial vehicles registered statewide over the last six years. Last year, the number of miles driven on state and federal roads in California rose to 182.6 billion, up 12 percent from 2000. LAT
L.A. office growth: First-quarter rents were running an average of $26.01 a square foot, a 3.8 percent increase from the previous three months. NY led the pack, with rents of $47.76, followed by Washington, D.C. at $39.87. Overall, however, demand for office space was on the sluggish side. From the WSJ:
While average office rents were up at a near-record pace in the quarter, the median increase in the 79 markets was far lower at 1.3%, signaling unevenness in a recovery that is tilted toward the coasts. Reis projects rents nationwide to rise on average 5% to 6% this year, down from 9% in 2006.
Hotel Sam: That's as in Sam Nazarian, the Hollywood nightclub tycoon, who is venturing into luxury hotels. SLS Los Angeles, formerly Le Meridien at Beverly Hills, will be the first hotel in the SLS Hotels brand. Nazarian wants to open hotels in NY, Mexico, and the Caribbean - all to be managed by Starwood Hotels & Resorts Worldwide Inc. LAT
LAX holding the bag?: The airport and the feds are duking it out on who should pay what for a $900 million overhaul of baggage-screening systems. Several years ago, the federal Transportation Security Administration had agreed to pay three-quarters of the cost, but that was before those costs began to skyrocket. Its pledge now amounts to just $256 million. From the Daily Breeze:
The city's airport agency was relying on a preliminary plan developed by the TSA's chosen contractor, Boeing, to come up with that estimate. Significantly, that plan assumed existing buildings at the airports could house the new baggage systems. That wasn't the case. By 2005, the airport agency had realized the original plans wouldn't work in five of the nine terminals at LAX, and in both of the terminals in Ontario, according to the GAO report. Its revised plans included entirely new buildings and, in one case, a screening room dug underneath an existing LAX terminal.
Lacter on radio: This morning's business chat with KPCC's Kari Moran covers the Tribune saga, the New Century bankruptcy filing and higher gasoline prices.