By Michael Oneal
The Los Angeles Times
Objections to the firm's Chapter 11 disclosure statement flood in before a key hearing. They include a filing by a previously silent group of senior creditors angry over its treatment in the plan.
The filings included a new objection from a previously silent group of senior creditors angry over its treatment in the company's plan of reorganization, further splintering the all-important senior creditor class in the case.
The U.S. Labor Department also weighed in, saying the document does not give ample disclosure to the agency's ongoing investigation into whether Tribune Co.'s contested 2007 leveraged buyout violated federal labor laws.
The U.S. Labor Department also weighed in, saying the document does not give ample disclosure to the agency's ongoing investigation into whether Tribune Co.'s contested 2007 leveraged buyout violated federal labor laws.
Legal experts said it was difficult to tell at this point whether the objections could disrupt the timing of Tribune Co.'s exit from Bankruptcy Court, which is now scheduled for early August.
But at the least, Tribune Co. lawyers have their work cut out for them to address all the concerns in a new draft of the disclosure statement, which U.S. Bankruptcy Judge Kevin Carey will consider at next Thursday's hearing.
"Obviously we have a lot of problems with it," said White & Case attorney Thomas Lauria, who represents the newly dissident creditor group.
Most of Thursday's objections said Tribune Co. — which owns the Los Angeles Times, Chicago Tribune and other media outlets — didn't provide enough information about how the settlement plan was reached or how it takes into account charges brought by junior creditors that the 2007 leverage buyout was an example of "fraudulent conveyance," meaning the debt-heavy deal rendered the company insolvent from the start. Objectors wanted to see more disclosure of those charges.
Before Thursday's objection deadline, at least one key group of senior creditors led by distressed investment hedge fund Oaktree Capital had publicly objected to the plan.
Meanwhile, the Labor Department argued in a filing that the disclosure statement must provide more information on the potential risks for creditors stemming from its months-long investigation into whether the leveraged buyout's use of a complex structure reliant on an employee stock ownership plan violated the Employee Retirement Income Security Act of 1974.
The agency pointed out that the federal district court in Chicago recently denied Tribune Co.'s motion to dismiss a class action suit against fiduciaries to the employee stock ownership plan, including Tribune Co. Chairman Sam Zell, charging that they had breached their fiduciary duty by engaging in "prohibited transactions."
It also contested a provision in Tribune Co.'s settlement plan that would release Zell and others from any claims arising from Employee Retirement Income Security Act violations.
In a statement, Tribune Co. said it had no doubt it could push through its plan and avoid more litigation.
"The Plan of Reorganization we have filed with the Bankruptcy Court is fair to our creditors and n the best interests of all parties involved with our Chapter 11 process," the company said. "We remain confident in our ability to get the plan approved by our creditors and confirmed by the Bankruptcy Court."
mdoneal@tribune.com
Papers Exiting Bankruptcy Dump 75% of Debt
The four newspaper companies that have exited bankruptcy to date have shed three-quarters of their of debt, collectively trimming nearly $2 billion in burdensome obligations.
In so doing, the publishers will take some pressure off their newspapers to produce aggressive profits during an historic – and ongoing – collapse in advertising sales. But that doesn’t mean the staffs at those newspapers can rest easy.
As detailed in the Bankruptcy Scorecard below, the publishers who unburdened their balance sheets through Chapter 11 are MediaNews Group, which chucked 82% of its debt; Minneapolis Star Tribune, which deep-sixed 79% of its debt; Morris Publishing Group, which dumped 69% of its debt, and Journal Register Co., which unloaded 68% of its debt.
Collectively, the foursome stiffed their lenders for $1.9 billion, or 74.5% of their outstanding debt. In most cases, lenders were persuaded to forgive a portion of the debt in exchange for an ongoing ownership stake in the companies, which will have value only if the companies can be sold somewhere down the line for more than they are worth today.
With the amenable settlement of these four bankruptcies, the cases of four more publishers remain to work through the federal bankruptcy courts.
Together, the publishers in the pending cases are seeking relief from $14.3 billion in debt, though most of that sum is associated with the Tribune Co., which owes creditors nearly $13 billion.
As advertising plunged 43% from a high of $49 billion in 2005 to an estimated $28 billion in 2009, even the most determined publishers found they could not keep up with the obligations to their creditors. The significant reduction in debt enabled by Chapter 11 gives them a chance to start with significantly cleaner slates.
But neither pubishers, nor their employees, are out of the woods. The post-bankruptcy agreements struck between creditors and publishers call for all manner of stringent performance standards, not the least of which is exacting profit targets.
To the degree newspaper revenues continue to slide – as they appear to be doing by double-digit levels in the first months of this year – publishers will be challenged to deliver on the fresh promises they have made.
And that could lead to more of the production consolidation, job outsourcing, staff cutting and news hole shrinking that characterized the pre-Chapter 11 era.
By Alan Mutter - Reflections of a Newsosaur
http://newsosaur.blogspot.com/2010/03/papers-exiting-bankruptcy-dump-75-of.html
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