Tribune Co. completed an important step toward exiting Chapter 11 bankruptcy on Thursday (Apr. 8), announcing that it's major creditors, J.P. Morgan and Angelo Gordon, had reached an agreement with Centerbridge Partners, Tribune's largest bondholder.
The dispute between Centerbridge, also known as an unsecured creditor, and the company's senior lenders over what the value of Centerbridge's holdings would be after Tribune restructures had been holding up Tribune's efforts to restructure the company and exit bankruptcy. Under this agreement, Centerbridge wll receive 7.4% of Tribune's distributable value, which will be paid in a combination of cash, debt and stock.
Meanwhile, Tribune's senior lenders will end up owning 91% of the equity of the reorganized company, in the form of cash, debt and stock, according to a press release issued by Tribune.
Tribune's leadership -- including CEO Randy Michaels, COO Gerry Spector and Chief Legal Officer Don Liebentritt -- now will file a plan with the U.S. Bankruptcy Court in Delaware explaining how the company expects to restructure.
Details are not yet available but under the plan a sizeable amount of the company's $13 billion in debt, acquired when financier Sam Zell took over the company in 2007, is expected to be written-off by Tribune's senior creditors. That should leave Tribune a much healthier and more flexible company when it comes to acquiring programming, hiring talent and other costs. On the other hand, much of the current equity value in Tribune will be erased, leaving most common stockholders - and vested employees - holding valueless paper.
A hearing on Tribune's reorganization will be held at the Delaware court on Tuesday; the plan will be filed at the court prior to that time.
Tribune is expected to emerge from bankruptcy this summer.
Broadcasting & Cable Newsletter
The smarter way to stay on top of broadcasting and cable industry. Sign up below
Contributing editor Paige Albiniak has been covering the business of television for nearly 25 years. She is a longtime contributor to Next TV, Broadcasting + Cable and Multichannel News. She concurrently serves as editorial director for entertainment marketing association Promax. She has written for such publications as TVNewsCheck, The New York Post, Variety, CBS Watch and more. Albiniak was B+C’s Los Angeles bureau chief from September 2002 to 2004, and an associate editor covering Congress and lobbying for the magazine in Washington, D.C., from January 1997-September 2002.