Tribune Settles Buyout Dispute With Some Creditors

By Steven Church

April 8 (Bloomberg) -- Tribune Co. said it settled a dispute among its main creditors by giving 91 percent of the bankrupt publisher to lenders and a smaller stake to other creditors.

The proposed settlement would avoid a new lawsuit over its 2007 buyout, which was blamed for the publisher’s bankruptcy a year later. The deal has the support of lenders, including JPMorgan Chase & Co. and Centerbridge Partners LP, along with the official committee of unsecured creditors.

“I think it’s a product of a lot of give and take,” creditor committee attorney Howard Seife said in an interview. “There was a lot of compromise on both sides.”

Lower-ranking bondholders who have already sued JPMorgan and the other banks behind Tribune’s buyout aren’t part of the agreement, company spokesman Gary Weitman said.

Under the proposal, the holders of the senior notes would receive 7.4 percent of the company’s distributable value, which would be paid in a combination of cash, debt and stock, according to the statement.

The company’s senior lenders would receive cash and debt, and more than 91 percent of the equity of the reorganized company.

The proposal assumes the company is worth about $6 billion, Seife said. Under the proposal, more than $11.2 billion worth of debt will be traded for stock, cash and new loans, Seife said.
Wilmington Trust

Lower-ranking bondholders represented by their agent, Wilmington Trust Corp., won’t receive anything from the plan. The bondholder lawsuit was filed against JPMorgan Chase Bank, Merrill Lynch Capital Corp., Citibank NA, Bank of America NA and Morgan Stanley & Co.

Tribune’s 2008 bankruptcy divided creditors. Wilmington Trust alleged in its complaint on March 4 that Tribune’s banks caused the bankruptcy by arranging loans the company had no chance of repaying.

The proposal must be incorporated into a plan of reorganization. After creditors get a chance to vote on it, U.S. Bankruptcy Court Judge Kevin Carey will make the final decision on whether to approve it.

“It is another significant step forward as we continue to transform our media businesses, attract and retain talented people, and seize opportunities to grow,” Tribune Chief Executive Officer Randy Michaels said in a statement.

Tribune filed bankruptcy in December 2008, one year after real estate billionaire Sam Zell used more than $8 billion in loans to take control of the publishing and television company. The company’s newspapers include the Los Angeles Times and Chicago Tribune.

Tribune managers have said in court that they have been trying to broker a settlement of the buyout claims that will allow the company to exit bankruptcy. They have sought an extension to April 30 of their exclusive right to reorganize the company.

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 schurch3@bloomberg.net.