NEW YORK (AP) - The Tribune Co. says it has won broader support for a new bankruptcy-reorganization plan. With new backing from a major lender and a committee of junior lenders, the agreement could help the media conglomerate finally free itself from bankruptcy protection after nearly two years in court.
The plan incorporates aspects of a compromise put forward last month by two of Tribune’s major creditors. To win broader approval, Tribune has committed to giving its bondholders more of their money back. They would get $420 million, or about 33 percent of what they’re owed, up from $300 million.
In return, the plan would shield the company’s more senior lenders from legal claims related to their financing of the early stages of the $8 billion deal that took the company private in 2007.
Tribune said the extra cash for bondholders is coming from senior lenders who were already receiving debt payments from Tribune before the company filed for bankruptcy protection. It declined to specify those lenders by name.
With those aspects of the plan in place, it has gained the support of JPMorgan Chase, one of the senior lenders that stand to take over the company, and of the unsecured creditors committee, which represents junior lenders.
The plan may still face hurdles. Tribune did not say where some of the company’s other lenders stand. Aurelius Capital Management, which holds some of Tribune’s senior bonds, did not immediately respond to a request for comment. Nor did the attorney representing Tribune’s junior bondholders.
Tribune owns the Los Angeles Times, Chicago Tribune and 19 TV stations, among other media properties. The 2007 deal left Tribune with nearly $13 billion in debt and helped put the company in Chapter 11 protection a year later as the newspaper advertising market cratered. An independent investigator concluded this summer that some negotiations leading up to the deal bordered on fraud, a finding that torpedoed the company’s original reorganization plan.
Lenders aside, other parties associated with the buyout would still remain exposed to lawsuits. Those include Sam Zell, the real estate mogul who put it together, and the company’s shareholders and board members at the time of the deal.
The plan calls for the appointment of an independent trustee to pursue any legal claims arising from the deal on behalf of the company’s creditors. Tribune says the first $90 million in damages recovered in any lawsuit would go to its junior lenders.
The idea of leaving legal claims to an independent trustee was introduced as a compromise last month by two of Tribune’s biggest lenders, the hedge fund Oaktree Capital Management and distressed-debt specialist Angelo, Gordon & Co. Both have endorsed the new plan, Tribune said.
A court appointed mediator, Judge Kevin Gross, has also approved the settlement, as well as the special committee of Tribune’s board assigned to oversee negotiations.
In a memo to Tribune employees, Tribune CEO Randy Michaels and Chief Operating Officer Gerald Spector said, “We are supportive of the settlement and appreciative of the leadership of Judge Kevin Gross.”
Zell did not immediately respond to a request for comment made through the company.
The company plans to file its new reorganization plan with the U.S. Bankruptcy Court in Wilmington, Del., by the end of the week. A court hearing is scheduled for Oct. 22.