According to the Chicago Sun-Times – which is hardly a disinterested observer – the major creditors of Tribune Company are preparing their own bankruptcy reorganization plan, which would not include CEO Sam Zell. But they’ll have to wait months yet before they can take action.
For obvious reasons, the bankers and others holding $8.6 billion from the ill-timed going private by Tribune Company are frustrated by the pace of divestitures by Zell to pay down the company’s huge debt load. He did get Cablevision to pay $650 million for Newsday and sold off some real estate assets. The pending sale of the Cubs and Wrigley Field will bring in another $900 million. But Zell has resisted putting other properties up for sale in the deeply depressed market for media properties.
The Sun-Times notes that Tribune’s debt has lately been trading for about seven cents on the dollar. That could mean that some debt holders would be happy to see Tribune’s newspaper and broadcast properties divested at fire-sale prices, because they would still come out ahead. Other holders would likely just like to take their losses and move on. So, the interests of the debt holders are not aligned with those of Tribune management.
But the creditors can’t do anything yet. Management remains in control in Chapter 11 until the federal bankruptcy judge says otherwise. In Tribune’s case, the judge has extended until November 30th the exclusive right of Zell’s management team to submit a reorganization plan. Only then – and assuming the deadline isn’t extended again – can the creditors try to get the judge to consider their own alternative plan for the company and its assets.
RBR/TVBR observation: Don’t go dancing on the “Grave Dancer’s” grave just yet. If Sam Zell, Randy Michaels and associates can get the sale of the Chicago Cubs closed and keep improving operating performance, they could remain in the driver’s seat for bringing Tribune out of Chapter 11.