By Michael Oneal |
With the clock ticking on a March 31 deadline, Tribune Co. bought more
time to negotiate with its fractious creditors Wednesday when it filed a
motion in Delaware bankruptcy court to extend until April 30 its
exclusive right to propose a reorganization plan in its 15-month-old
Chapter 11 case.
Any extension of the “exclusivity period” would require a judge’s
approval. But the move takes advantage of a quirk in Delaware law, which
allows Tribune Co. to file the motion and essentially freeze
exclusivity until the next scheduled court hearing April 13.
Tribune Co., which owns the Chicago Tribune, the Los Angeles Times and other media properties, had filed four extensions in the case as it tries to broker a compromise deal between its sparring senior creditors and junior bondholders. It’s most recent extension was set to run out Wednesday.
Several sources said the goal is still to have an agreement before the April hearing, perhaps as early as in the next few days. But, as one source said, “Human nature is such that until the last minute, people aren’t willing to make a deal.”
Tribune Co.’s option had been to file a plan that would takes sides with one group of creditors, angering the other. Or it could have proposed an official compromise solution that ran the risk of angering everybody, sources said. Company management and its Chicago-based lead counsel, Sidley Austin, have been consistent in saying they’d like to reach a consensual plan to recapitalize the company. Now they’ve given themselves at least 13 more days to see whether that’s possible.
Tribune Co. won’t comment on negotiations, but the general architecture of a proposed restructuring plan hasn’t changed significantly since the middle of last year, sources said. Saddled with $13 billion in debt incurred largely to finance the disastrous 2007 leveraged buyout led by Chicago real estate magnate Sam Zell, Tribune Co. has proposed swapping most of the debt for equity in a newly public, unburdened company.
The focus of negotiations is how that equity would get split up.
Senior creditors, comprising banks led by JPMorgan Chase that lent more than $8.6 billion to the deal, as well as countless hedge funds and distressed debt investors who bought pieces of those loans on the secondary market, have long contended that the value of Tribune Co. has fallen well below $5 billion, meaning their claims, being senior, should overwhelm all others.
But two groups of junior bondholders with more than $2 billion at stake have cried foul, saying they were improperly subordinated to the senior lenders by the deal. They have threatened to bring a case of “fraudulent conveyance” and breach of fiduciary duty against the lenders, Tribune Co.’s board and Zell, charging that the LBO rendered the company insolvent as soon as the ink dried on the contracts.
After months of court-imposed discovery that produced more than 2 million documents and e-mails, the unsecured creditors committee filed a motion in early February asking U.S. Bankruptcy Judge Kevin Carey for permission to bring such a case.
The net effect has been to increase the leverage of the junior bondholders. But even that is complicated: One group of bondholders, led by distressed debt investor Centerbridge Partners, is senior in hierarchy to the other, represented by Wilmington Trust Co. That means the Centerbridge group has been central to the negotiations while Wilmington has complained in court of being left out.
Though details remain up in the air, a deal would likely give a large majority stake in Tribune Co. to the LBO banks and a consortium of other senior creditors led by distressed investing hedge funds Angelo, Gordon & Co. and Oak Tree Capital, sources say. The question is how much they will be willing to give up to buy peace with Centerbridge and the creditors committee. Whether Wilmington would be brought under the tent or have a deal forced on it is not clear. An attorney for the group did not return a request for comment.
The implications of not cutting a deal are plain. The April 13 hearing is scheduled to take up the creditor committee’s motion to file a fraudulent conveyance complaint as well as a separate action pressed by Wilmington. Absent a compromise among the major creditor groups, Tribune Co.’s expensive legal wrangling will continue.
Shouldn’t someone be in jail for this mess?
What’s really sad is that in most bankruptcy cases the estate is quickly depleted by attorneys’ fees and the creditors get nothing. And bankruptcy judges even often allow bankruptcy estates to take possession of and sell other people’s property – a practice that is allowed by the bankruptcy code under the guise of fairness translated to mean welfare for bankruptcy attorneys at the expense of hapless innocent third parties.
Any resolution to this mess that will permanently put the LA Times out of business is good for the Tribune, good for California, good for journalism, and great for America.
Is the Chicago Trib going to get “Obama Money”?
Tick…Tick…Tick
Let’s not forget that this disaster goes back to the spring of 2000. That was when Tribune Publishing President Jack Fuller, supported by CEO John Madigan and COO (soon to be CEO) Dennis Fitzsimons took $3 billion in cash and paired that with $5 billion in debt to buy Times-Mirror. Why? So they could say they now run one of America’s largest media companies. Pure ego. And Hillis (think his first name is John) got
49.5M as a golden parachute out of the T-M CEO job where he had spent a few years destroying that company. So pure greed, because I’m sure Fuller & Friends were well compensated for that deal.
Fast forward five years. The Chandler family, who were majority of shareholders at T-M, weren’t getting the returns they wanted/needed. The economy was slowing, the Internet was cutting into ad revenues, etc. Trib couldn’t pay back the $5 billion debt without cutting into dividends and available cash. The Chandlers were unhappy. So what did they do? In the spirit of al-Qaida in Iraq, they launched an insurgency to force Fitzsimons (Fuller and Madigan were retired, sitting on their millions by then) to sell the company. Problem! No buyers, except Sam Zell, who put together the worst business deal in American history and probably will lose one-third of his assets because of it. Or maybe not. The Sam Zells of the world always figure out how to get their share back, and more.
No, it’s the 13,000 people laid off by Tribune in the last five years who will be screwed. Not Fuller, not Madigan, not Fitzsimons, not Zell.
Trib was sitting on $3 billion in 2000, when the dot-com bubble burst, then 9/11, then the subprime mortgage meltdown, etc. Could the company have survived without cutting staff — and quality — by 50 percent? I’m willing to bet the rest of my career that it could have. The cash flow to the Chandlers might have ebbed a bit. But then, let those third-generation deadbeats get a job!
For the record, I work for the Sun Sentinel in Fort Lauderdale, a Tribune Co. newspaper. I am proud of the work I have done for Tribune in the past 13 years. And I VOTED AGAINST THAT GOD DAMNED MERGER IN 2000. That’s what really buried Tribune, not the 2007 deal. Zell’s attempt to save the company was simply the nails in the coffin.
Russell Small
Night City Editor
Sun Sentinel
Let’s not forget that this disaster goes back to the spring of 2000. That was when Tribune Publishing President Jack Fuller, supported by CEO John Madigan and COO (soon to be CEO) Dennis Fitzsimons took $3 billion in cash and paired that with $5 billion in debt to buy Times-Mirror. Why? So they could say they now run one of America’s largest media companies. Pure ego. And Hillis (think his first name is John) got
49.5M as a golden parachute out of the T-M CEO job where he had spent a few years destroying that company. So pure greed, because I’m sure Fuller & Friends were well compensated for that deal.
Fast forward five years. The Chandler family, who were majority of shareholders at T-M, weren’t getting the returns they wanted/needed. The economy was slowing, the Internet was cutting into ad revenues, etc. Trib couldn’t pay back the $5 billion debt without cutting into dividends and available cash. The Chandlers were unhappy. So what did they do? In the spirit of al-Qaida in Iraq, they launched an insurgency to force Fitzsimons (Fuller and Madigan were retired, sitting on their millions by then) to sell the company. Problem! No buyers, except Sam Zell, who put together the worst business deal in American history and probably will lose one-third of his assets because of it. Or maybe not. The Sam Zells of the world always figure out how to get their share back, and more.
No, it’s the 13,000 people laid off by Tribune in the last five years who will be screwed. Not Fuller, not Madigan, not Fitzsimons, not Zell.
Trib was sitting on $3 billion in 2000, when the dot-com bubble burst, then 9/11, then the subprime mortgage meltdown, etc. Could the company have survived without cutting staff — and quality — by 50 percent? I’m willing to bet the rest of my career that it could have. The cash flow to the Chandlers might have ebbed a bit. But then, let those third-generation deadbeats get a job!
For the record, I work for the Sun Sentinel in Fort Lauderdale, a Tribune Co. newspaper. I am proud of the work I have done for Tribune in the past 13 years. And I VOTED AGAINST THAT GOD DAMNED MERGER IN 2000. That’s what really buried Tribune, not the 2007 deal. Zell’s attempt to save the company was simply the nails in the coffin.
Russell Small
Night City Editor
Sun Sentinel
Let’s not forget that this disaster goes back to the spring of 2000. That was when Tribune Publishing President Jack Fuller, supported by CEO John Madigan and COO (soon to be CEO) Dennis Fitzsimons took $3 billion in cash and paired that with $5 billion in debt to buy Times-Mirror. Why? So they could say they now run one of America’s largest media companies. Pure ego. And Hillis (think his first name is John) got
49.5M as a golden parachute out of the T-M CEO job where he had spent a few years destroying that company. So pure greed, because I’m sure Fuller & Friends were well compensated for that deal.
Fast forward five years. The Chandler family, who were majority of shareholders at T-M, weren’t getting the returns they wanted/needed. The economy was slowing, the Internet was cutting into ad revenues, etc. Trib couldn’t pay back the $5 billion debt without cutting into dividends and available cash. The Chandlers were unhappy. So what did they do? In the spirit of al-Qaida in Iraq, they launched an insurgency to force Fitzsimons (Fuller and Madigan were retired, sitting on their millions by then) to sell the company. Problem! No buyers, except Sam Zell, who put together the worst business deal in American history and probably will lose one-third of his assets because of it. Or maybe not. The Sam Zells of the world always figure out how to get their share back, and more.
No, it’s the 13,000 people laid off by Tribune in the last five years who will be screwed. Not Fuller, not Madigan, not Fitzsimons, not Zell.
Trib was sitting on $3 billion in 2000, when the dot-com bubble burst, then 9/11, then the subprime mortgage meltdown, etc. Could the company have survived without cutting staff — and quality — by 50 percent? I’m willing to bet the rest of my career that it could have. The cash flow to the Chandlers might have ebbed a bit. But then, let those third-generation deadbeats get a job!
For the record, I work for the Sun Sentinel in Fort Lauderdale, a Tribune Co. newspaper. I am proud of the work I have done for Tribune in the past 13 years. And I VOTED AGAINST THAT GOD DAMNED MERGER IN 2000. That’s what really buried Tribune, not the 2007 deal. Zell’s attempt to save the company was simply the nails in the coffin.
Russell Small
Night City Editor
Sun Sentinel