Tuesday, April 13, 2010

Tribune blocks competing reorganization plans

By Tom Hals - Reuters

* Tribune blocks competing proposals for reorganization
* Battle shifts to management pay, Zell's liability
* Hearing on request for examiner postponed to allow talks

WILMINGTON, Del., April 13 (Reuters) - Tribune Co fended off the threat of an alternative reorganization plan on Tuesday, but now the U.S. newspaper publisher faces battles over its 2007 leveraged buyout and executive pay before it can emerge from bankruptcy.

A bankruptcy court judge on Tuesday gave the publisher of the Chicago Tribune and Los Angeles Times the exclusive right to propose a plan of reorganization, which it did on Monday.
The company's proposed plan values the company's equity at $4.1 billion and gives senior credit facility lenders control of 91 percent of its stock.

The plan also released Chairman Sam Zell and others of any liability relating to the $8.3 billion leveraged buyout.

Creditors have blamed the buyout for the company's bankruptcy in 2008, and those releases prompted hedge funds holding $3.6 billion of the company's senior debt to seek the right to file their own plan.

While the judge did not allow the hedge funds to file a plan, they will be able to take their fight over Zell's liability to Tribune's confirmation hearing.

Also at Tuesday's hearing, one of the company's current allies, investment fund Angelo Gordon & Co, indicted it would fight the company's management incentive plan at confirmation if it were not modified. In September, the company had asked for court permission to establish two bonus plans worth up to $20 million combined that would focus on the performance of approximately 40 top executives. The court never ruled on that request.

The judge postponed a hearing on a request by holders of $1.2 billion of junior bonds for an examiner to investigate the leveraged buyout.

In postponing the examiner request, and likely as a way to spur talks, U.S. Bankruptcy Court Judge Kevin Carey suggested an examiner could be appointed to investigate both the buyout and also the actions by the junior bondholders' attorneys.

JPMorgan Chase & Co (JPM.N) has asked the court to impose sanctions on the bondholders' attorneys for improperly disclosing confidential documents.

"If the parties thought it possible, I might be willing to give them some time to see if they can bring everyone into the fold," Carey said, encouraging the parties to negotiate.

The company and the junior bondholders agreed to meet to discuss the scope of an examiner and report back to the court on April 22.

Two groups of lenders who say they are owed nearly $5 billion combined appear determined to object to the plan. One group said Tribune’s announcement was premature and misleading. Those creditors, who say they are owed more than $3.6 billion, include Oaktree Capital Management, Goldman Sachs Loan Partners, and Marathon Asset Management.

Holders of more than $3.6 billion of claims under a 2007 secured credit agreement said in a court filing Monday that the announcement of a deal that Tribune struck with other creditors was premature and misleading.

The lenders said that without their support, the purported global settlement Tribune announced last week is "dead on arrival." Tribune said the settlement would avoid all potential claims related to a leveraged buyout in 2007 that left the company mired in debt.

The lenders argue that they would bear the entire burden of the proposed settlement by giving up more than $400 million in value to bondholders and other unsecured creditors.

A separate group — junior bondholders represented by Wilmington Trust Co. — allege that JPMorgan Chase, Bank of America, and other banks that financed the buyout engaged in fraud because they knew the debt would leave Tribune insolvent. Those creditors hold $1.2 billion in bonds they stand to lose.

Tribune said it settled with a senior bondholder, Centerbridge Partners, which holds 37 percent of Tribune’s outstanding senior bond debt. It would get a 7.4 percent stake in Tribune.
Tribune said JPMorgan and Angelo, Gordon, which stand to get over a 91 percent stake in the company, agreed to the plan.

The junior bondholders would get nothing.

The case is In re: Tribune Co et al, U.S. Bankruptcy Court, District of Delaware, No. 08-13141.

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