Tribune Co. revises bankruptcy settlement
Publisher Tribune Co. filed a modified Chapter 11 plan on Oct. 23 incorporating a revised settlement announced this month. In addition to Tribune, proponents of the revised plan include the official creditors' committee, senior lenders Oaktree Capital Management LP and Angelo Gordon & Co., and JPMorgan Chase Bank NA, as agent for the senior lenders.
The accompanying disclosure statement says that senior lenders, owed $8.6 billion, will recover about 71 percent through receiving cash plus all of the new stock. Holders of $1.28 billion in senior notes would receive $420 million in cash for an initial recovery of about 32.7 percent.
Other unsecured creditors of the parent Tribune would receive 35.2 percent cash or an initial 32.7 percent plus the ability to participate in litigation recoveries. General unsecured creditors of operating subsidiaries are to get 100 percent payment, without interest, up to a total of $150 million.
Holders of the $1.6 billion bridge loan won't receive any distribution unless they succeed in fending off a lawsuit set to proceed after Tribune emerges from bankruptcy.
The settlement and the new plan are based on a settlement with senior lenders of claims that the leveraged buyout in 2007 resulted in fraudulent transfers. Distributions under the plan exceed what the examiner said would be probable recoveries through litigation, according to the disclosure statement.
After bankruptcy, a trust established for creditors can pursue lawsuits to void the bridge loan while seeking recoveries against selling shareholders. In addition, the trust can sue directors, officers and company advisers. The first $90 million recovered by the trust will go to unsecured creditors, including bondholders.
At a hearing on Oct. 22, the bankruptcy judge said he would sign an order allowing creditors to file lawsuits based on the 2007 buyout.
Any competing plans and their disclosure statements are to be filed by Oct. 29. The company's disclosure statement was more than 140 pages, not including exhibits.
The arrangers for the bridge loan and the debt issued in the second part of the leveraged buyout are providing a backstop to insure that sufficient cash will be available for payment to senor noteholders.
The disclosure statement says that Tribune had $1.8 billion cash at Sept. 26, an increase of $300 million since December. Net income for nine months this year was $121 million on $2.33 billion revenue. Operating cash flow for the period was $422 million.
The disclosure statement says that the mid-point enterprise value for the reorganized company is $3.2 billion. Including cash and other assets, the mid-point distributable value is $6.75 billion. The equity value of the reorganized company is pegged at $4.3 billion, according to the disclosure statement.
Tribune said on Oct. 22 that Randy Michaels resigned as chief executive officer, effectively immediately. Tribune said that a four-member executive council will take over Michaels's duties until a replacement is selected. The executive council includes the chief restructuring officer, the chief investment officer, and the publishers of the Chicago Tribune and the Los Angeles Times.
Tribune withdrew a reorganization plan in August after the examiner issued a report saying there was some likelihood that the second phase of the leveraged buyout in December 2007 could be attacked successfully as a constructively fraudulent transfer. The examiner found less likelihood that the first phase of the transaction in June 2007 could be attacked successfully.
The second part of the buyout entailed the issuance of $2.1 billion on the senior credit and the $1.6 billion bridge loan. For a summary of some of the examiner's conclusions, click here for the July 27 Bloomberg bankruptcy report. Tribune's abandoned plan would have forced through a settlement some creditors opposed.
The $13.7 billion leveraged buyout in 2007 was led by Sam Zell.
Tribune is the second-largest newspaper publisher in the U.S. It listed $13 billion in debt for borrowed money and assets of $7.6 billion in the Chapter 11 reorganization begun in December 2008. It owns the Chicago Tribune, Los Angeles Times, six other newspapers and 23 television stations.
The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District Delaware (Wilmington).