It looks like Tribune Company now has a deal with its creditors on a reorganization plan for the company to emerge from Chapter 11 bankruptcy. The new plan was negotiated by the court-appointed mediator and covers claims from both “Step 1” and “Step 2” of Tribune’s ill-fated 2007 leveraged buyout.
Tribune management said it will support the agreement reached by its Official Committee of Unsecured Creditors, Oaktree Capital Management, Angelo, Gordon & Co, and JPMorgan Chase Bank on the reorg plan.
The new settlement expands upon the plan proposed last month by Oaktree and Angelo, Gordon with respect to Step 1, which was endorsed by Tribune management as a viable alternative if no comprehensive plan could be agreed upon. Tribune credits the court-ordered mediation overseen by US Bankruptcy Court Judge Kevin Gross with taking that further to what is now a universal settlement of claims, including Step 2 as well.
“With the able assistance of Judge Gross, we continue to achieve success in our mediation efforts, and are pleased to have now expanded the plan settlement to include the Official Committee of Unsecured Creditors,” said Don Liebentritt, Tribune’s Chief Restructuring Officer. “The additional value being allocated to our bondholders and other unsecured creditors represents a fair and equitable settlement for all of our constituencies. We remain confident that Tribune continues on a path toward resolution of its Chapter 11 cases that maximizes the value of the bankruptcy estates, preserves all stakeholders’ legitimate entitlements and enables the company to conclude its bankruptcy proceedings as soon as possible,” he added.
And now for the nitty gritty details.
An important component of the new settlement is the contribution of $120 million in cash by recipients of pre-bankruptcy payments on the Incremental tranche of the Tribune Senior Loan and the Bridge Loan facilities through an optional settlement of those claims, with the arrangers for those facilities providing a backstop to ensure that the estates receive the full settlement payment on the plan’s effective date. This additional settlement payment, together with additional contributions by holders of the Senior Loans, allows for Tribune’s bondholders to receive $420 million, representing 32.73 cents on the dollar upon emergence plus their interest in a litigation trust, and provides for trade creditors of Tribune’s operating subsidiaries to be paid in full.
As with the previously-announced settlement, this agreement allows for the distribution of the equity of the reorganized Tribune and its subsidiaries pro rata to the holders of the Initial and Incremental Senior Loan claims.
In addition, claims and causes of action against various parties (including advisors, directors and officers involved in the 2007 transactions) will be preserved and placed in a litigation trust and pursued for the benefit of creditors of Tribune. The first $90 million of recoveries from the trust will be allocated to Tribune’s general unsecured creditors, including its bondholders. The litigation trust will allow an independent litigation trustee to pursue legal action relating to the remaining fraudulent conveyance issues alleged by various unsecured creditors, while minimizing the possible negative impact these litigation issues might have on the company’s business operations.
Tribune Company said it intends to file a plan of reorganization and disclosure statement incorporating both settlement agreements with the US Bankruptcy Court for the District of Delaware by Friday, October 15th. The case is being overseen by US Bankruptcy Judge Kevin Carey, who appointed his colleague, Judge Gross, as mediator at the beginning of September.
RBR-TVBR observation: As hopeless as it appeared at times, Judge Gross deserves a lot of credit for finding a common ground to bring so many parties with so many divergent interests to a settlement. Oaktree and Angelo, Gordon also get a round of applause for making the first breakthrough last month with the partial settlement plan. The comprehensive plan now being written still incorporates the idea of a liquidation trust to handle some remaining legal claims, but the big ones will all be wrapped up in this package and Tribune will soon be able to emerge from bankruptcy. That’s good news for employees, the communities their stations and newspapers serve and the current creditors who will be shareholders of the new Tribune Company.