Tuesday, December 30, 2008

Tribune Co. outlays failed to halt spiral

By Ameet Sachdev | Tribune reporter

$3 million spent on legal work to manage debt before bankruptcy

Before Tribune Co. sought bankruptcy protection on Dec.8, the Chicago-based media company and Chicago Tribune owner had spent nearly $3 million for legal work related to managing and restructuring its massive debt.

Those efforts began as early as March, three months after Chicago real estate investor Sam Zell completed a deal to take Tribune Co. private in a leveraged buyout, according to court documents filed Dec. 26 by Sidley Austin, Tribune Co.'s bankruptcy counsel.

Sidley's filing, as well as papers submitted to the bankruptcy court by other Tribune Co. advisers, indicate that the prospect of Chapter 11 reorganization became a more likely scenario in November, weeks before the bankruptcy petition was filed in Delaware.

In early November, Tribune Co. hired consulting firm Alvarez & Marsal, well-known restructuring and bankruptcy advisers, to assist with bank negotiations, among other things, according to court papers. Prior to Tribune Co.'s bankruptcy, Alvarez & Marsal was paid more than $1 million by the media company.

Also last month, Tribune Co. hired the Edelman public relations firm to assist with communications in connection with a possible Chapter 11 petition, Edelman said in court documents. Tribune Co. provided Edelman with two retainers totaling $110,000. As of Dec. 14, Edelman had applied $98,000 for incurred fees and expenses.

Tribune Co. also set up a retainer for Sidley Austin, the company's longtime outside counsel. On Nov. 24, Tribune Co. gave the Chicago law firm an advance of $3.5 million, and 10 days later increased the retainer by $1 million.

Sidley's work intensified beginning in October and through Dec.4, when it billed the company more than $2.2 million.

"Much of the legal work described in the application had nothing to do with the contemplation of a possible bankruptcy proceeding," a Tribune Co. spokesman said. "Instead, the focus was on matters that large corporations typically contemplate in the ordinary course with respect to their credit facilities, including possible asset sales, early debt repayments and debt buybacks, refinancing and similar items."

About $1.4 million remained in the retainer as of Dec. 8, said Sidley's James Conlan in court papers.

Bankruptcies don't come cheap. Sidley's partners charged between $575 and $1,100 per hour. The hourly rates for managing directors at Alvarez & Marsal range from $525 to $750.

Tribune Co. also is paying investment banker Lazard Freres & Co. a monthly fee of $200,000. Payments to advisers are subject to court approval.

Much is at stake. Tribune Co. also owns the Los Angeles Times and other papers and is a major broadcaster. In its bankruptcy petition, the company listed assets of $7.6 billion and $12.9 billion in liabilities.


No comments: