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Three years in Chapter 11, Tribune now seeks action

by Chris Nolter | Published November 22, 2011 at 12:33 PM

With the third anniversary of its Chapter 11 petition approaching, Tribune Co. will ask a Delaware bankruptcy judge to expedite hearings on a revised plan for reorganizing its roughly $12 billion in debts. Judge Kevin Carey, who rejected reorganization plans from Tribune and a rival creditor group in late October, has set a Tuesday status hearing on the case.

"The debtors have been in bankruptcy too long," Tribune's pleadings state.

The Chicago media company, which owns the Chicago Tribune and Los Angeles Times, in addition to TV stations in large markets, sought Chapter 11 protection in December 2008. Carey's October ruling said that the debtor and its warring creditors needed to find an exit from Chapter 11 protection, and threatened to appoint a trustee if they do not. Tribune filed an amended reorganization plan late Friday that addresses Carey's concerns, and could provide a bump in recoveries to Sam Zell and other creditors.

The debtor filed the plan jointly with its Unsecured Creditors Committee and secured debt holders Oaktree Capital Management LP, Angelo Gordon & Co. and J.P. Morgan Chase & Co. The proposal could allow Tribune to leave bankruptcy protection before it resolves some of the legal snags that have delayed its Chapter 11 case. At Tuesday's hearing, Carey will also hear from a rival noteholder group lead by Aurelius Capital Management LP.

The noteholder group has filed notice that it is appealing Carey's rejection of their plan. Constituents of the group have also asked Carey to reconsider elements of his order.

Carey's October ruling found that Tribune's settlement with the lenders who financed Zell's LBO was fair, but still pointed out faults with the company's reorganization plan.

The new plan addresses questions about the subordination of some classes of securities. It also spells out methods for gauging creditor support among Tribune's far-flung network of subsidiaries. A number of creditor groups could see adjustments to their recoveries. Zell, who took Tribune private in late 2007, holds about $225 million in notes that would have received no recovery under Tribune's previous plan.

Under the new proposal, Zell's EGI-TRB LLC could get as much as 26.7 cents on the dollar. Former Tribune Chairman Zell could barter his recoveries to secure releases from other creditors.

Holders of Tribune's so-called "Phones" securities could also see increased recoveries. An ad-hoc group of the investors has so far opposed Tribune's plan.

The Phones are linked to reference shares of Time Warner Inc. that Tribune holds. The value of securities is disputed, with Tribune and its supporters saying the securities are worth $759 million and a committee of holders arguing that the amount is closer to $1.2 billion. Like the Zell notes, Tribune's previous plan gave holders of the Phones notes no recovery. In the new version, the Phones could recoup up to 16.4 cents on the dollar.

Meanwhile, Senior Noteholders would have received 33.6 cents under the dollar under Tribune's original plan. They could see recoveries of 19.8 to 36.5 cents under the new proposal.

Other claims against the parent company were to receive 36 cents on the dollar, but could have recoveries of 21.8 cents to 36 cents under Tribune's new plan.

Tribune wants Carey to schedule litigation for the disputed matters while the debtor solicits new votes from some creditors and proceeds toward a February confirmation hearing.

Litigation over eight disputed items could occur before or after the plan confirmation hearing. Tribune could set up a reserve to deal with adjustments to claims if the litigation occurs after plan confirmation. The company would also resolicit votes from creditor groups that would have changes in their recoveries. Ballots would be due Jan. 20.

Tribune requested a Dec. 13 hearing to set the new schedule.

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Tags: bankruptcy | Chapter 11 | restructuring | Sam Zell | Tribune Co.

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Three years in Chapter 11, Tribune now seeks action

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