Friday, August 14, 2009

Court Extends Tribune Co. Control Of Chapter 11 Case

Chicago Tribune

A bankruptcy judge said Tribune Co. can keep control of its Chapter 11 case for three-and-a-half more months as it looks to sell off some assets, including the Chicago Cubs, in its bid to exit bankruptcy protection.

Judge Kevin J. Carey of the U.S. Bankruptcy Court in Wilmington, Del., on Monday gave the publisher of the Chicago Tribune an extension to Nov. 30 to file its reorganization plan to emerge from bankruptcy and to repay creditors. He also set a March 15, 2010, deadline for the media giant to win creditor support for a plan.

The extension allows Tribune Co. to maintain exclusive control over the path of its bankruptcy case by preventing creditors and others from filing rival plans with the court.

The Chicago media company, owner of the Chicago Tribune, filed for bankruptcy seven months ago under the weight of some $13 billion in debt, much of it related to real-estate mogul Sam Zell's 2007 deal to take Tribune private.

The company said recently that it has achieved "significant progress" during the case but needs more time to negotiate with creditors and close the sale of the Chicago Cubs. The ball club, whose holdings include Wrigley Field, is one of Tribune's most valuable assets.

Tribune Co. has a tentative deal to sell the team to the Ricketts family, who founded TD Ameritrade Holding Corp., in a deal valued at just under $900 million. Tribune Co. is also reportedly considering a bid from a group led by private-equity investor Marc Utay. The sale of the team requires court approval.

Tribune - which also owns the Los Angeles Times, the Baltimore Sun and other dailies, as well as 23 TV stations - is selling the Cubs, Wrigley Field and its stake in a Chicago cable sports network to raise capital.

The company, the nation's third-largest newspaper publisher in terms of revenue and circulation, has also moved to slash costs by cutting jobs at some of its TV stations and daily newspapers.

Faced with an unprecedented drop in advertising revenue and steadily declining circulation, a number of U.S. newspapers have been forced to cut editorial positions, close foreign bureaus and even cease publishing daily print editions in bids to survive.

Several other newspaper companies, including the publishers of the Philadelphia Inquirer, Minneapolis Star Tribune and Chicago Sun-Times, have followed Tribune into bankruptcy court in recent months.

Report Surfaces Again That Tribune's Zell Could Be Ousted

Los Angeles Business from bizjournals

Real estate mogul Sam Zell, who privatized the parent of the Los Angeles Times Co., could be ousted as part of reorganization plan put forth by creditors, the Chicago Sun-Times reports Friday.

The Chicago Sun-Times reports that the creditors plan to stage a takeover of their own and sell off the company's newspapers and broadcast stations as they see fit. The Sun-Times cites sources who are close to the deal.

Zell owes these creditors $8.6 billion, and those creditors are reportedly becoming impatient with him. But the creditors have until Nov. 30 before they can file a plan since Zell was on Monday granted an extension on his own Tribune reorganization.

This isn't the first time this rumor has surfaced. Reports came out in June that stated Zell would lose Tribune to the same group of investors.
That report stated that "the plan centers on a debt-for-equity swap that probably would give the senior lenders a large majority ownership stake in the reorganized company."

Tribune went private in December 2007 through a buyout led by Zell. The deal left the company with nearly $12 billion in debt. Tribune has sold off assets and cut jobs since the close of the deal to help with the debt payments. The company filed for bankruptcy in December 2008.

Tribune Boss Zell On Way Out

by David Roeder
Chicago Sun Times

Sam Zell's days as a media titan in Chicago are nearly over.

The motorcycle-riding billionaire, renowned for his deft touch with real estate and corporate turnarounds, took Tribune Co. private in late 2007 promising to energize the lumbering company. He piled on debt at exactly the wrong time, and a collapse in advertising for traditional media forced him to take the company to Chapter 11 bankruptcy.

Eight months after the filing, two sources familiar with the process said creditors are working on a reorganization plan that elbows Zell aside. The creditors, including investment banks owed $8.6 billion from Zell's Tribune takeover, would stage a takeover of their own and sell off the company's newspapers and broadcast stations as they see fit.

"The banks will be in charge," one insider said, adding that they are growing impatient with Zell's stewardship. The bankruptcy court on Monday granted Zell extended time, until Nov. 30, to be the first to file a reorganization plan. Creditors have to wait at least that long before filing their own plan with the court.

William Brandt Jr., a corporate turnaround expert not involved in the case, said "enough time has passed so that creditors and the debtor want to cut losses and save face. He said an honorable exit is especially important to Zell, who might need investment banking help for future deals."

"This was a textbook case of a leverage buyout gone bad," said Brandt, president of Development Specialists Inc. "These were imbeciles who had no idea what they were doing."

Brandt said Zell waited too long to sell major assets, accomplishing only a $650 million sale of Newsday, the Long Island-based daily. A sale of the Tribune-owned Chicago Cubs for around $900 million is not final and suffered a months-long detour when Zell tried to sell Wrigley Field separately to an arm of state government.

Still, Tribune financial reports filed with the bankruptcy court show recent improvement. The company's cash on hand rose to $740.5 million as of June 28, up from $702 million in late May. It reported profitable operations in June aside from debt obligations, but for the period from Dec. 8, 2008 to June 28 it said it lost $836.5 million. The numbers don't include units such as the Cubs, which were left out of the bankruptcy filing.

Tribune spokesman Gary Weitman said, "Since going private, we have re-engineered many of our existing products and introduced new ones, expanded our local news programming, dramatically reduced our expenses and positioned the company to succeed in the face of an extremely difficult ad environment and a worsening economy."

He added that Zell and other managers "remain actively engaged and committed to Tribune. The restructuring is still in progress and we continue having positive discussions with our various creditor constituencies. It is premature to speculate about the company's final ownership structure."

While the company has laid off workers, it has hired others to fill new needs. Bankruptcy experts said creditors usually don't object to such new expenses if they believe they help preserve value.

Tribune debt recently traded for about 7 cents on the dollar, meaning investors think a lottery ticket is just as likely to pay off. The company's total debt, counting what Zell assumed in his takeover, is around $13 billion.

Brandt said the Tribune deal has become such a "reputational disaster" for Zell that's he's probably not involved much in management other than creditor negotiations. That could be one reason the company wants bankruptcy court approval to pay bonuses of about $70 million to top managers.

Tribune owns the Chicago Tribune, the Los Angeles Times and other major newspapers, as well as WGN-TV and radio and 22 other TV stations.

David Wirt, chairman of the bankruptcy practice at the firm Locke Lord Bissell & Liddell, said Zell may be getting pressure because creditors want to see revenue growth, and not just cost-cutting. Also, the bankruptcy process is expensive and participants tire of paying lawyer fees that can top $800 an hour for senior partners, said Wirt, whose firm is not involved in the case.

In late 2008, debt analyst Mike Simonton of Fitch Ratings estimated Tribune was worth about $4 billion if sold. Since then, the company's balance sheet has worsened. As of June 28, Tribune said its liabilities exceeded assets by $7.1 billion, vs. $5.7 billion at the time of Simonton's estimate.

Even after a drawn-out liquidation, creditors may be lucky to get a third of their investment back.article originally published at Chicago Sun Times.

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