Friday, July 24, 2009

Tribune Co. asks bankruptcy court to allow severance, bonus payments

Chicago Tribune parent Tribune Co. today filed motions in Delaware seeking U.S. Bankruptcy Court authorization to resume severance payments to individuals who left the media company before its Chapter 11 filing in December, as well as to pay discretionary incentive bonuses for 2008 to nearly 700 managers, directors and others.

Tribune Co.’s top 10 executives would not be part of the managerial pool that would split a little more than $13 million in bonus money, which the company considers part of the would-be recipients’ annual compensation as part of the normal course of business.

The median award would be $9,500 and the average award a little more than $18,000, with 84 percent of the recipients receiving payments of less than $30,000 and 70 percent getting less than $20,000.

Earlier Wednesday, before the motion was filed in anticipation of a May 12 court hearing, the Tribune Co. flagship paper Chicago Tribune reduced its newsroom staff by 53 in response to economic conditions and industry changes.

Tribune Co., which filed for Chapter 11 protection because it was struggling to manage the heavy debt taken on when it went private in late 2007, said in its motion that it is “vitally necessary to reward the participants for their extraordinary contributions during an exceptionally difficult year.”

The company implemented strategic initiatives in 2008 that are expected to generate approximately $425 million in incremental annualized cash flow.

Tribune cut its workforce by around 2,400 positions last year, or 13 percent, including more than 2,100 jobs from its publishing division and redesigned each of its daily newspapers, which it said will save $80 million annually.

According to the motion, Tribune Co.’s publishing division generated $461 million in operating cash flow last year, a margin of 16.7 percent “during one of the worst years in newspaper advertising history.” Twenty-one of its 23 television stations, along with WGN-AM 720, gained market share in 2008.

The amounts of the incentive payments were negotiated downward by several million dollars and the official committee of unsecured creditors supports approximately $12.2 million to be spread across 670 recipients, according to the motion. The committee has yet to take a position on payment of another $1.1 million for 23 people, pending review.

The motion regarding severance payments involves about $2.5 million and covers roughly 70 employees who left the company in the months before the Chapter 11 filing and stopped receiving severance payments.

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