Tribune Creditors Denied Opportunity To File Competing Bankruptcy Plan

May 17th, 2010 by Reed Allmand

A federal judge overseeing Tribune Co.’s bankruptcy case refused to let a group of creditors file an alternative to the media company’s Chapter 11 bankruptcy reorganization plan. The bankruptcy plan proposed by Tribune Co. has come under fire by a group of lenders who claim they are owned more than $3.6 billion under a 2007 secured credit agreement and that Tribune’s Chapter 11 bankruptcy plan will deprive them of more than $400 million in favor of unsecured creditors whose settlement cleared the way for the bankruptcy plans filing.  The objecting group of lenders argued that their competing bankruptcy plan would not significantly delay Tribune’s bankruptcy exit.  However, the bankruptcy judge denied the lenders’ request to file a competing Chapter 11 bankruptcy plan, but suggested that he may appoint an independent examiner to look at certain issues, including the 2007 leveraged buyout that was engineered by real estate mogul Sam Zell and left the company mired in debt.

Under Tribune’s plan, JPMorgan and distressed-debt specialist Angelo, Gordon & Co. would be among the new owners of the company’s media properties, which include Los Angeles Times, the Chicago Tribune, other daily newspapers and broadcast stations.

Under the proposed Chapter 11 bankruptcy exit plan, major lenders such as JPMorgan would hold a 91 percent stake in Tribune worth about $5.56 billion, based on the company’s appraisal of its value. Centerbridge Partners, representing a group of senior bondholders, would receive a 7.4 percent stake, paid in cash, stock and debt under the bankruptcy plan, equaling about $451 million, or roughly 35 cents for every dollar owed to the senior noteholders. And finally, existing shareholders, including Zell and the company’s employee stock ownership plan would be completely wiped out.