Sunday, September 27, 2009
WILMINGTON, Del. Still mired in Chapter 11 protection, the Tribune Co. said Friday it needs authority to dole out up to $70 million in bonuses as motivation for top managers working in a difficult environment for the media industry.
Testifying before a federal bankruptcy judge, Chief Financial Officer Chandler Bigelow III said the bonuses would help "incentivize our key managers to battle all of the intense challenges that unfortunately our local media businesses are facing."
He noted that Tribune's advertising revenue in publishing is down 29 percent compared with last year, and broadcasting revenue is off 23 percent.
Tribune, which owns the Los Angeles Times, Chicago Tribune, The Sun of Baltimore and other dailies, along with 23 TV stations, filed for bankruptcy protection in December because of dwindling advertising revenues and a crushing debt load of $13 billion. Much of that debt was amassed when real estate mogul Sam Zell took the company private in 2007.
Tribune properties across the country have undergone cost cuts, including layoffs.
The Washington-Baltimore Newspaper Guild, which represents employees of the Sun, considers the bonuses unwarranted. The Guild is joined in its objection by two Baltimore-based Teamsters locals and by the Newspaper Guild of New York, which represents 29 employees at television station WPIX.
IBEW Local 1212, which represents 83 broadcast engineers at WPIX, also protested the bonus plan.
At the start of what was expected to be an all-day hearing, Judge Kevin Carey suggested that credible arguments could be made for and against the bonuses."In a troubled industry as this one, the argument could be made that bonuses should not be paid, or certainly not of this magnitude," the judge said.
On the other hand, he noted, companies working to survive in a troubled industry can reasonably be expected to try to attract and retain the top-level talent needed to improve their business.
Bigelow noted that Tribune's committee of unsecured creditors, as well as a steering committee of senior lenders, have signed off on the bonuses, which also were approved by the board's compensation committee.
Bigelow said the bonuses were designed using operating cash flow as the key metric and a 2009 target of $212 million, less than a third of last year's $789 million. The company already has exceeded the 2009 target, with operating cash flow of about $255 million through August and a projected year-end figure of between $350 million and $400 million.
Bigelow rejected Guild claims that the target was set too low."The plan was developed in good faith, with integrity," he said.
Posted by Robert Daraio at 6:45 PM