Tribune Co. may have cut its own Gordian knot … and that's a good thing.
The troubled company, which publishes The Chicago Tribune and The Los Angeles Times and owns various broadcast properties, announced Tuesday that it has come to a deal with two of its biggest creditors.
“As a result of the court-ordered mediation … we have reached a settlement with Oaktree Capital Management and Angelo Gordon & Co. on a plan of reorganization for the company,” Tribune CEO Randy Michaels said in a note to employees Tuesday. “The settlement also has been approved by the special committee of Tribune’s board of directors overseeing our Chapter 11 process.”
The announcement comes just days after another round of mediation sessions between all parties began on Sept. 27. Tuesday at least one set of creditors made their displeasure with the potential new reorg plan public. The Official Committee of Unsecured Creditors said late in the day that they were “disappointed that Tribune and some senior lenders have reached an agreement that does not provide fair value to all creditors.” The Committee, who filed what was essentially a Russian Roulette motion on Sept, 13 seeking permission from the court to pursue legal claims against Sam Zell and others involved in taking the company private in Dec. 2007 if they choose to, put their own bargaining chip on the table for all to see. “If the plan is not modified to reflect a fair settlement,” they said in a statement, “the Committee intends to oppose the plan and the settlements it embodies.”
Neither Oaktree Capital Management nor Angelo Gordon & Co. responded immediately to requests for comment. The creditors might be keeping quiet, but the new plan they are a part of says a lot.
The plan is designed to allow Tribune Co. to exit Chapter 11 — which it's been in for almost two years now — as well as distribute equity in the newly reorganized company to creditors. It will also set up a litigation trust to handle the potential plethora of suits against current Tribune chairman Zell, as well as claims arising from the handling of the company's going private in 2007. This trust includes a settlement which provides for senior bondholders to receive a total distribution of $300 million — valued at about 23 percent of their claim amount — in cash plus their interest in the litigation trust.
Of course, like so much of Tribune’s Chapter 11 saga, none of this is written in stone.
For one thing, it's still a framework of a plan until something is formally submitted to the court. And there are still a number of hurdles in the way: Other creditors will undoubtly have a thing or two to say about the deal, especially the notoriously litigious hedge fund Aurelius Capital Management.
Once that’s cleared, disclosure statements will have to be filed by Tribune and others; and Judge Kevin Carey has to sign off on those and their language. Then a voting process has to be set up among creditors.
And then, and only maybe then, Tribune might be in the clear to get its house in order – and that’s not even getting into the matter of new management, like former Disney CEO Michael Eisner, a close friend on Angelo, Gordon & Co co-founder John Angelo, being brought onboard (as TheWrap has reported in the past).
“This is,” said one individual close to case told TheWrap, “a long long way from being over.”
