Saturday, September 26, 2009

Bankrupt Tribune Seeks between $66 and $70 Million in Manager Bonuses (Update1)

By Steven Church

Sept. 25 (Bloomberg) -- Tribune Co., the bankrupt newspaper publisher, is seeking court permission to pay as much as $66 million in bonuses to its managers based on operating cash flow predicted to be the lowest in at least 10 years.

The money would be paid to the 720 top editors, television station managers and executives should the company end the year with $424 million in operating cash flow, company attorney Jonathan D. Lotsoff said during a hearing today in U.S. Bankruptcy Court in Wilmington, Delaware.

About half of the bonuses, $32 million, would go to the top 21 corporate officers.

“In such a challenging environment, it is absolutely critical,” to pay the bonuses, Lotsoff told U.S. Bankruptcy Judge Kevin Carey.

Chicago-based Tribune filed for bankruptcy court protection in December, about a year after real-estate billionaire Sam Zell’s $8.3 billion purchased the publishing and television company. Tribune owns the Los Angeles Times and the namesake Chicago newspaper among other properties.

Judge Carey said he would issue a decision on the bonus request later.

The proposed bonuses are opposed by company unions representing some of Tribune’s reporters and other employees.

Union officials say the maximum bonus amount is almost $70 million when smaller, discretionary bonuses are added.

Union lawyer Chris Simon said the cash payments were the highest ever paid to Tribune managers at a time the company had the lowest cash flow in at least 10 years.

“It just doesn’t seem justified,” Simon said.

In the past, cash bonuses were supplemented with stock, Company Chief Financial Officer Chandler Bigelow said in court.

Union accountant Edward Phillips said that the managers would take home more than 15.5 percent of the operating cash for 2009. The company employed about 12,000 when it filed for bankruptcy in December.

Bigelow claimed in court that the bonuses would keep executives focused on cost-cutting and the effort to reorganize Tribune’s newspapers and television stations.

“We’re literally trying to tackle every single business aspect of the company,” he said.

This year, the company expects to save as much as $150 million in salaries and $150 million in newsprint costs, Chandler said.

The bankruptcy costs the company $7 million to $8 million a month.
In 2006 the company had cash flow of $1.5 billion. That fell to $789 million last year and is projected to be from $350 million to $400 million, Chandler said. This year the company expects total revenue to fall about $800 million.

The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporter on this story: Steven Church in Wilmington, Delaware, at

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