FCC chief's action seen advancing Tribune deal

by Michael Oneal and Phil Rosenthal, Chicago Tribune

Fresh from a stinging political defeat over his attempt to bring the cable industry under his control, Kevin Martin, chairman of the Federal Communications Commission, took a step toward giving Chicago real estate magnate Sam Zell the temporary regulatory relief he needs to close his $8.2 billion deal to take Tribune Co. private.

According to a source at the FCC, Martin circulated a proposal among the four other FCC commissioners addressing Zell and Tribune's request for temporary waivers to media cross ownership rules and new television station licenses.

That's the first step in the approval process. Now the commissioners must indicate their approval or disapproval of the proposal. Two of them have said that they can make their decision within three days of receiving it from the chairman.

The FCC source hadn't seen Martin's proposed language yet and didn't know how he had structured the waivers in terms of scope or duration. Assuming the language is close to what Tribune asked for, however, three, and perhaps four, of the five commissioners are likely to vote for the proposal, based on previous public statements.

Tribune and Zell, who applied for the waivers in May, have been waiting with bated breath for some indication that the FCC would move forward. The FCC's two Democratic commissioners had accused Martin of holding the Tribune deal hostage to try to drum up support for a broader political agenda.

Tribune's anxiety stems from the fact it needs 20 days after FCC approval in order to close its deal by the end of the year – a crucial deadline for creating the corporate structure needed to assure the tax breaks that are central to making the complex transaction work. If the approvals come by Friday, Tribune will have enough time to close by year's end. But any further delay would force the company to renegotiate the 20-day cushion with its creditors.

The language of the proposal is crucial. Although the waivers will certainly be temporary, Tribune will have to show its creditors that it has enough of a regulatory window to meet with their approval. Martin has said that by Dec. 18 he wants the commission to vote on a partial but permanent repeal of the rules that prohibit a company from owning a newspaper and broadcast outlet in the same market. It is unclear, however, if he has the political support for such a maneuver, which means Tribune would need longer waivers to assure compliance in several of its key markets.

In a statement, Tribune Chairman and Chief Executive Dennis FitzSimons said that the company was "pleased with Chairman Martin's proposal which, if approved, will enable Tribune's going private transaction to close by the end of the year. This will allow Tribune's local media outlets to continue their commitment to outstanding journalism and service to our readers, viewers, listeners and advertisers."

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