Published on Monday, 12 April 2010 14:49
As mentioned here last Thursday, April 8th,
the Tribune Company announced that they had reached an agreement with their creditors, and that with this new new agreement, they would now now be on the path to exit bankruptcy. There was only one tiny problem with that... the Tribune seems to have forgotten to have actually run this plan past all
of their creditors. The "agreement" may have only been from within the Tribune's own walls and a few of the many creditors. Now, a large group of several senior secured creditors is challenging the Tribune's "agreement" and plan to emerge from Chapter 11 bankruptcy.
The creditor group, which includes Oaktree Capital Management and Goldman Sachs Loan Partners, says it represents $3.6 billion, or 42%, of the most senior level of Tribune Company's debt. The group said in a court filing today that the announcement of a deal that Tribune struck with other creditors was premature and misleading, as well as "internally inconsistent and unfair." More than that, they are saying that without their support, the settlement Tribune announced last week is "dead on arrival."
The lending group leading this dissent claim that the Tribune so-called agreement is "impossibly tainted" since it seeks to give a "free pass" to some certain high-ranking Tribune executives, including Sam Zell, and large creditors still friendly with the company, including JPMorgan Chase and Centerbridge Capital Advisors. The upset creditors also point to a Tribune proposal that gives 7.5% of the company's equity to upper management, diluting the value of other new shareholders in a reorganized company.
The dissenting lending group said, "This is a 'settlement' made possible with 'other people's money' -- specifically, that of the credit agreement lenders and other current holders of credit agreement claims left holding the bag."
Among the requests in their court filing today, the group is now asking U.S. Bankruptcy Judge Kevin Carey to propose a "fairer and less rank" alternative plan, which does not award other creditors at least $400 million of value at their expense.
The Tribune Company is expected to officially file its proposed reorganization plan that was brought public on April 8th, later this week*.
Despite the opposition noted above, or perhaps because of it, the Tribune Company today went ahead and filed its reorganization plan with the US Bankruptcy Court, earlier than expected. Sam Zell stated, "Today's filing represents a significant and positive step forward for the business." The plan must still be approved by company's creditors and the Bankruptcy Court.