Tribune Co. files bankruptcy reorganization plan, still faces lender opposition

Tribune Co. files bankruptcy reorganization plan

The Tribune Co. filed a bankruptcy reorganization plan that would allow it to keep its newspapers and broadcast stations while wiping out most of its debt, even as two groups of lenders vowed to unravel a pivotal part of the proposal.

If the plan filed Monday is approved, ownership of the media company would go to a group of lenders including JPMorgan Chase & Co. and Angelo, Gordon & Co. Those lenders support the plan and an underlying settlement over allegations of fraudulent conduct in financing the 2007 leveraged buyout that left Tribune mired in debt.

Tribune, which publishes the Los Angeles Times, Chicago Tribune, The (Baltimore) Sun and other daily newspapers and owns TV and radio stations, has described the settlement as “global” and key to emerging from Chapter 11 bankruptcy protection.

The plan filed Monday incorporates elements of that deal, which came together 16 months after Tribune filed for Chapter 11 bankruptcy protection because it couldn’t fully repay debts totaling $12.7 billion.

Two groups of lenders who say they are owed nearly $5 billion combined appear determined to object to the settlement.

One of the groups, in a court filing earlier Monday, said Tribune’s announcement of the deal was premature and misleading, and those lenders called the settlement “dead on arrival.” Those creditors, who say they are owed more than $3.6 billion under a 2007 secured credit agreement, include Oaktree Capital Management, Goldman Sachs Loan Partners and Marathon Asset Management.

A separate group of creditors — junior bondholders represented by Wilmington Trust Co. — alleged in a lawsuit last month that JPMorgan Chase, Bank of America and other banks that financed the buyout engaged in fraudulent conduct because they knew the debt load would leave Tribune insolvent. Those creditors, which hold $1.2 billion in Tribune bonds that they stand to lose in the case, filed a separate objection Monday.

Tribune said Thursday that it had come to an agreement with a senior bondholder, Centerbridge Partners, to settle any potential claims that it might have brought related to the buyout. Centerbridge, which holds 37 percent of Tribune’s outstanding senior bond debt, would get a 7.4 percent stake in Tribune, paid in a combination of cash, stock and debt, if the court approves Tribune’s plan.

Tribune said JPMorgan and Angelo, Gordon, two of the financial firms that stand to take over a 91 percent stake in the company under the plan, have also agreed to the settlement, as has Tribune’s committee of unsecured creditors.

Under the terms of the proposed settlement, junior bondholders who filed the lawsuit last month would receive nothing. Holders of notes issued by EGI-TRB LLC, an investment vehicle established by Zell to facilitate the leveraged buyout, also would get no distribution.

But in a filing in U.S. Bankruptcy Court in Wilmington, Oaktree and other secured credit agreement lenders argued that they would bear the entire burden of the proposed settlement by giving up more than $400 million in value to bondholders and other unsecured creditors. They reiterated their request that the court terminate Tribune’s exclusive authority to file a reorganization plan, so that they can submit an alternative.

“There is no reason not to give all creditors a choice,” wrote attorneys for the credit agreement lenders.

Tribune spokesman Gary Weitman declined to comment on the objection. JPMorgan and Angelo, Gordon didn’t immediately return calls for comment, nor have attorneys for the Oaktree group or Wilmington Trust.

The lenders argue that they would be left “holding the bag,” while Zell, other current and former Tribune directors and officers, and JPMorgan and the other banks that financed the buyout, would be absolved of any liability and “released for free,” without making any payment or consideration to creditors.

“In short, the proposed settlement is unwise and unfair and, as will be shown at the appropriate time, the proposed plan incorporating that settlement is unconfirmable for multiple reasons,” attorneys wrote.

AP Business Writer Randall Chase in Dover, Del., contributed to this story.