San Zell's adventure in the print newspaper business may be coming to an end, as the Tribune Co. and its senior creditors are reportedly in the early stages of working out a deal that would transfer control of the bankrupt Chicago media conglomerate to its senior lenders.
Sources tell the
Chicago Tribune that the company's U.S. Bankruptcy Court reorganization plan could change the capital structure through a debt-for-equity swap that would give senior lender that hold $8.6 billion in debt a controlling stake.
Among the consortium of senior creditors are J.P. Morgan Chase & Co. (NYSE:JPM), Citigroup Inc. (NYSE:C), Oaktree Capital Management and Angelo, Gordon & Co. According to
The Deal Pipeline (subscription required) the members of Tribune's official committee of unsecured creditors, along with J.P. Morgan, includes Merrill Lynch Capital Corp., Deutsche Bank Trust Co., Time Warner Inc.'s (NYSE:TWX) Warner Bros. Television, Vertis Inc., William Niese, the Pension Benefit Guaranty Corp. and the Washington-Baltimore Newspaper Guild Local 32035.
With senior debt now trading at roughly 30 cents on the dollar, there might not be too much equity left after a restructuring for those lower in the capital structure. But that doesn't mean Zell and his management team would be out the door. Senior lenders may want to keep them in place to run things as the newspaper industry weathers tough times. Those issues are likely to have been worked out well ahead of time since management is the one submitting the reorganization plan to the bankruptcy court.
Still, should the company be reorganized along these lines, Zell would see his $90 million warrant, which gives him the right to buy 40% of the Tribune for $500 million, wiped out. Further complicating reorganization plans is the company's S-Corp ownership structure, which gave the company's ESOP plan 100% of the company's equity. -
George WhiteSee Chicago Tribune storySee Deal Pipeline story on unsecured lender committee
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