If all of the creditors of Tribune Company show up, the bankruptcy judge in Delaware might need a circus tent to hold the hearings. The list of creditors runs to 2,387 pages. Tribune Company’s Chapter 11 filing lists assets of $7.6 billion and total debts of just under $13 billion. The biggest claim, not surprisingly, is from the lender group that put up over $8 billion to finance the going private deal a year ago.
This is really a bonanza for bankruptcy lawyers. The Tribune Chapter 11 filing is actually 38 Chapter 11 filings – one for Tribune Company and one each for 37 subsidiaries. And while there are thousands of creditors, it really comes down to the people and institutions who hold $2.16 billion of notes and bonds, the consortium of 10 lenders who put up the $8.57 billion senior credit facility and the group of lenders who funded a $1.6 billion bridge loan.
The lending consortium includes JP Morgan Chase, with the largest stake of slightly over $1 billion, Deutsche Bank, Angelo Gordon and Co. LP, KKR financial Corp., Viking Global Performance LLC, Highland Capital Management LP, Davidson Kempner Capital Management LLC, Avenue Advisors LLC, Goldman Sachs Group Inc. and Taconic Capital Advisors LLC. The largest lenders for the bridge loan are JP Morgan Chase, Merrill Lynch Capital Corp., CitiCorp North America and Banc of America Bridge LLC.
Tribune Company employees will be happy to learn that the company has filed a motion for the bankruptcy court to allow it to pay employees, temporary workers and independent contractors the wages, salaries and payments owed at the time of the bankruptcy filing. Tribune’s publishing operations have about 12,000 employees and broadcast/entertainment 2,600 employees. Gross monthly wages are approximately $79.7 million, according to the filing. As of the date of the Chapter 11 filing, some $18 million in wages were outstanding to be paid. Going forward as a Debtor in Possession, the company should be able to pay its employees as before.
RBR/TVBR observation: A quick back of the napkin calculation indicates that Tribune needs to cut its debt load by about half to move forward comfortably in the current economic reality. There are two ways to do that: asset sales and swapping equity for debt. Our guess is that Tribune will wind up doing both. The employee “owners” via the ESOP would be diluted by having stock issued to lenders and bondholders, but the company is so heavily leveraged that the 100% of equity currently held by the ESOP may not amount to much of anything these days. There’s also the question of taxes. Can Sam Zell now figure out a way to hand over something like equity to lenders and bondholders without disrupting the tax advantages of ESOP ownership?