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William A. Osborn

Part two: Warning signs

When Bank of America credit officer Dan Petrik and his team sat down in early 2007 to analyze Sam Zell's plan to take control of Tribune Co., their numbers showed that the complex deal failed to meet five of the bank's 10 lending guidelines.

There was too much borrowed money, too little collateral and the overall risk rating that BofA assigned to the transaction was below what the bank liked to see, according to its preliminary analysis. Petrik had never worked on a deal so weighed down by debt. He couldn't remember doing a transaction that had missed so many lending criteria.

Yet within a week, BofA was prepared to move forward as a lender. The appeal, Petrik said, was $40...