The Tribune Co. filed a bankruptcy reorganization plan Monday that sharply reduces its debt and keeps the company intact, while handing over ownership to a group of lenders including J.P. Morgan Chase and Angelo, Gordon & Co.
Their filing in the U.S. Bankruptcy Court in Delaware is a significant step toward emerging from bankruptcy later this year, as the company anticipates. It must be approved by the company’s creditors and the court.
The plan does not call for shedding assets, as had once been anticipated, but rather keeps properties like the Los Angeles Times, the Chicago Tribune and the Tribune broadcast stations under one roof while cutting a substantial amount of its debt. The lenders would get 91% of the reorganized company.
Tribune chairman Sam Zell, who led the 2007 leveraged buyout only to file for Chapter 11 bankruptcy reorganization in late 2008, said that the filing “represents a significant and positive step forward for the business.”
The plan, however, was greeted by blistering objections from a group of creditors, including Oaktree Capital Management, Goldman Sachs Loan Partners and Marathon Asset Management, which said in their own filing that reorganization is “impossibly tainted by the Debtors’ attempt to give a free pass to their insiders. And it is not a settlement that has the approval or agreement of the lion’s share of the entities being asked to fund it.”
Those creditors hold more than $3.6 billion of claims from a senior credit agreement with Tribune in 2007. They complain that under the plan, Zell and the company’s board essentially are “released for free, without any payment or consideration, accompanied by unlimited indemnities from the reorganized enterprise.” And they also say that they are “left holding the bag” for the agent banks “who sold them the debt in the first place.” They argued that they would be giving up more than $400 million in value to bondholders and other unsecured creditors.
Another group of creditors, holding some $1.2 billion in bonds, also raised objections in a filing on Monday. They are represented by Wilmington Trust Co.
A Tribune Co. spokesman had no comment on the challenges to its plan.
In a settlement announced last week, Tribune said it had reached agreement with senior creditors like J.P. Morgan and Angelo, Gordon to trade debt for stock, cash and new loans. The deal also proposes indemnifying Zell, J.P. Morgan and others involved in the leveraged buyout from litigation, including charges of fraud and mismanagement.
In a letter to Tribune employees, Tribune’s chief executive officer, Randy Michaels, and chief operating officer Gerry Spector said the plan would provide the company with “sufficient liquidity to continue expanding our business and taking advantage of strategic opportunities.” They noted that last year, “our media businesses generated substantial operating cash flow, which positions us well for the future.”
“As the approval process moves forward, discussions with our creditors will continue and there may be objections filed with the court,” they wrote. “This may result in a lot of noise; don’t let it distract you from doing your job. We believe the plan will be approved and that we will be able to emerge from bankruptcy this year.”
They also said the plan avoids “expensive litigation that could further delay our emergence from bankruptcy protection.”
(The Associated Press contributed to this report.)