Tribune Co.’s bankruptcy reorganization plan still faces opposition from unhappy lenders

Trib Co.’s Chap. 11 comeback plan still under fire

The Tribune Co. would give ownership of the Los Angeles Times, Chicago Tribune and other media properties to its main creditors under a bankruptcy reorganization plan that calls for wiping out most of the debt from an ill-timed buyout engineered by real estate mogul Sam Zell.

Although some creditors have backed key elements of the proposal submitted Monday, the plan still faces stiff opposition from two groups of lenders that have derided it as a one-sided deal negotiated by self-interested parties. One group called a critical part of the plan “dead on arrival.”

Bolstered by a settlement announced last week, the Tribune Co. is hoping to win court approval of the plan later this year to end a contentious process that started in December 2008 when the Chicago-based company filed for Chapter 11 bankruptcy protection in Wilmington, Del. JPMorgan Chase & Co. and distressed debt specialist Angelo, Gordon & Co. would be among the new owners.

Like other newspaper publishers, Tribune Co. has seen revenue fall because of reduced spending in the recession and the Internet’s inability to command as many ad dollars as print.

The Tribune Co.’s plan, filed ahead of a hearing on the case Tuesday, envisions the newspaper advertising slump continuing for several more years, leaving it with 2012 publishing revenue of $1.85 billion — a drop of more than $900 million, or 33 percent, from 2008 levels.

The company’s projections call for a modest recovery at its more than 20 television stations, although broadcasting revenue still isn’t expected to rebound to its 2008 total of $1.17 billion. The Tribune Co.’s plan forecasts the broadcasting division’s revenue will be $991 million this year and $1.06 billion by 2012.

Despite its eroding revenue, the Tribune Co. expects to be in far better shape if its reorganization plan is approved because it wouldn’t be weighed down by so much debt. The company would emerge with total long-term debt of about $900 million, according to the bankruptcy plan’s projections.

The company entered bankruptcy protection with $12.7 billion in debt, most of it stemming from an $8.3 billion buyout orchestrated by Zell. The deal closed at the end of 2007 just as the newspaper industry’s advertising woes worsened. The rapid decline in the Tribune Co.’s main source of revenue made it increasingly difficult for the company to repay its lenders.

Similar cash-flow problems have caused more than a dozen other U.S. newspaper publishers to seek bankruptcy protection since the Tribune Co.’s filing. Many of them have already emerged from Chapter 11.

The Tribune Co.’s plan is similar to that of several other newspaper publishers in that lenders would be getting majority stakes in their companies to shed most of their debts, though the Tribune case has been complicated by allegations of fraudulent conduct in financing the 2007 leveraged buyout.

If the plan is approved, the new owners would be a group of creditors that include JPMorgan Chase and Angelo, Gordon. Existing shareholders, including Zell, his investment fund and the company’s employee stock ownership plan, would be wiped out.

The plan didn’t say whether the new owners intend to retain Tribune CEO Randy Michaels and Zell, who is still chairman. “We’re looking forward to emerging from Chapter 11 and building on the momentum we’ve generated,” Michaels said in a statement. Zell hailed the plan as “a significant and positive step forward for the business.”

JPMorgan Chase and Angelo, Gordon didn’t immediately return calls late Monday.

Those creditors already have expressed their support for the reorganization plan and an underlying settlement over the allegations related to the buyout.

But two groups of lenders that say they are owed nearly $5 billion combined appear determined to object to the “global” settlement underpinning the reorganization plan. Both the settlement and the plan require court approval.

One of the groups, in a court filing earlier Monday, described Tribune’s announcement as misleading and called the settlement “dead on arrival.” Those creditors, which say they are owed more than $3.6 billion under a 2007 secured credit agreement, include hedge fund 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 completely in the case, filed a separate objection Monday.

Under the plan, the major lenders such as JPMorgan Chase would hold a 91 percent stake in Tribune worth about $5.56 billion, based on the company’s appraisal of its value.

Centerbridge Partners, which leads a group that owns outstanding senior bond debt, would get a 7.4 percent stake, paid in a combination of cash, stock and debt under the plan. That would translate to about $451 million, or roughly 35 cents for every dollar owed to the senior noteholders.

Up to $150 million in cash would be paid in full to cover the claims of vendors that sold Tribune supplies and services.

In their own filing Monday, Oaktree and other secured credit agreement lenders argued that they would bear the entire burden of paying off Centerbridge and other 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.

Tribune spokesman Gary Weitman declined to comment on the objection. Attorneys for the Oaktree group and Wilmington Trust didn’t immediately return calls Monday.

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