Tribune Co. makes progress with several creditors

By Michael Oneal
Posted Oct. 12, 2010 at 11:05 a.m.

Tribune Co. and several of its most important creditor groups announced a broad new settlement Tuesday that brings the company closer to resolving its nearly two-year-old bankruptcy case.

The new pact includes a group of senior lenders who had been holding out on a compromise, the company said, as well as the Official Committee of Unsecured Creditors in the case, which represents junior creditors.

Still absent from the settlement, however, are several key junior creditor groups including major bondholder Aurelius Capital Management, a litigious New York hedge fund known for disrupting large bankruptcy cases. Sources close to Aurelius have said the fund plans to file its own plan by the court imposed Oct. 15 deadline.

The company said the new pact was worked out with the help of the court-appointed mediator in the case, U.S. Bankruptcy Judge Kevin Gross. It was blessed by a special independent committee of Tribune Co.’s board.

A key breakthrough in the plan is that it calls on senior lenders led by JPMorgan Chase to increase up-front payments to junior bondholders like Aurelius by $120 million, bringing their recovery to $420 million, or 32.73 cents on the dollar, the company said.

In return for those payments, the lenders would get releases from exposure to litigation related to the second step of Tribune Co.’s ill-fated 2007 leveraged buyout.

Like an earlier deal, it would also create a litigation trust to allow junior creditors to pursue some legal claims related to the buyout. But in this settlement, the junior creditors would have a guaranteed claim on the first $90 million generated through any litigation.

Trade creditors to the company’s many subsidiaries, meanwhile, would get paid in full under the plan, a key victory for the creditors’ committee.

Tribune Co. Chief Executive Randy Michaels said the company intends to file its plan and disclosure statement before the end of the week.


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