Tribune Faces New Challenges To Restructuring Plan
By MICHAEL LIEDTKE and ANICK JESDANUN, AP Business Writers
NEW YORK (AP) – Tribune Co., struggling to get out of bankruptcy protection, faces a new round of challenges from creditors unhappy with the media company’s latest plan to restructure its business.
Three groups of creditors each submitted competing plans late Friday. The plans each claimed to offer better ideas for reorganizing the company, including streamlining the repayment of money owed to creditors and finding a better compromise on some thorny legal issues.
These latest proposals, which will have to be reviewed by a judge, could keep Tribune Co. from its goal of exiting bankruptcy protection by the end of the year.
The company, which owns the Chicago Tribune and Los Angeles Times newspapers and more than 20 radio and TV stations, filed for bankruptcy protection in December 2008. The filing came less than a year after real estate mogul Sam Zell led an $8.2 billion buyout of Tribune Co., which was heavily financed with debt.
The deal closed just as newspapers throughout the country entered an advertising slump that depleted their main source of income. An independent examiner concluded in July that some aspects of the Tribune buyout had bordered on fraud.
Friday’s alternative plans didn’t come as a surprise. After a dispute with creditors derailed the original reorganization plan that Tribune Co. filed in April, the bickering continued while a court-appointed mediator tried to negotiate a compromise.
The risk of such legal challenges has loomed since Tribune Co.’s exclusive right to file a reorganization plan expired in August.
The dispute between the Tribune Co. and some creditors centers on the Zell led buyout. Creditors have filed or plan to file lawsuits alleging that the big banks that financed the deal saddled Tribune Co. with more debt than it could afford.
If those suits succeed, creditors could get back more money, at the expense of the banks.
With multiple plans to consider, U.S. Bankruptcy Judge Kevin Carey, who is overseeing the case in Wilmington, Del., is likely to have to schedule more hearings to determine whether the proposals satisfy legal standards that would allow them to be voted upon by Tribune Co.’s creditors.
The media company found common ground with some creditors and was able to file its revised plan last week. Tribune Co. spokesman Gary Weitman said the company still considers its plan to be the best for creditors.
“We will continue to study these alternative plans, but still believe that the company plan, with its broad creditor and official committee support, is the best option for treating our stakeholders fairly and allowing the company to emerge from bankruptcy as quickly as possible,” he said in an e-mailed statement.
The Tribune proposal has the support of major creditors — JPMorgan Chase & Co., distressed debt specialist Angelo, Gordon & Co. and hedge fund Oaktree Capital Management — as well as the committee of junior lenders. It would give Tribune’s bondholders more money than an earlier proposal. In exchange, senior lenders would be shielded from any legal claims tied to the buyout.
On Friday, one group of creditors presented what it considered a more streamlined approach for distributing money to Tribune Co.’s lenders, bondholders and suppliers.
It would give creditors some of their money now, and the rest after the lawsuits over the buyout are concluded. That way, creditors won’t have to give back money later, according to the plan filed by creditors including Aurelius Capital Management, which holds some of Tribune’s senior bonds, and Tribune’s junior bondholders represented by Wilmington Trust Co.
Another plan, proposed by King Street Acquisition Co. and other creditors, favors settling key points over payments now to avoid or narrow lawsuits over whether the lead banks in the buyout are responsible for sending Tribune Co. into bankruptcy protection.
A third plan, filed by senior lenders that financed the early parts of the buyout, would preserve the right to sue banks that financed the final stage of the Zell buyout.
By the time the deal had reached that stage, it was clearer that the company would have trouble repaying the debt, an independent examiner in the case concluded. He described Tribune’s decision to shoulder the debt as irresponsible.
In a move related to that finding, a group of Tribune Co. creditors filed a lawsuit Friday in New York state court seeking to hold the banks behind the final stage responsible for the financial troubles resulting from the deal.
The lawsuit’s targets are JPMorgan Chase & Co.’s bank, Bank of America Corp.’s Merrill Lynch Capital Corp., Citigroup Inc.’s Citicorp and Bank of America.
A spokesman for JPMorgan declined to comment Saturday. The other banks didn’t return messages on Saturday.
The drama hasn’t been confined to the courtroom. Last week, Tribune Co. CEO Randy Michaels — a former radio industry executive brought in by Zell — resigned following published reports that he had cultivated a lewd office culture.
A committee of four executives from Tribune Co., Chicago Tribune and Los Angeles Times is running the company until a reorganization plan wins court approval and brings in a new ownership.
Tribune Co.’s plan would hand ownership to several of its largest creditors, including JPMorgan Chase, Angelo, Gordon & Co. and Oaktree Capital Management.
Even after getting out of bankruptcy, Tribune Co. believes its publishing revenue will decline for several years, although not as severely as it has been. Publishing accounts for about two-thirds of the company’s revenue, which is expected total $3.2 billion this year.
Michael Liedtke reported from San Francisco. AP writers Amy Shafer in Chicago and Samantha Bomkamp in New York contributed to this report.
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