Tribune files plan of reorganization based on settlements; ownership to be turned over to lenders

By Jennifer Lanning Drey

Savannah, Ga., Tribune Co. filed its plan of reorganization and related disclosure statement Friday with the U.S. Bankruptcy Court for the District of Delaware.

Under the plan, ownership of the company would be turned over to the holders of Tribune's initial and incremental term loans, Tribune said in a company news release.

The plan incorporates the terms of two previously announced settlement agreements reached by Tribune's unsecured creditors committee, Oaktree Capital Management LP, Angelo, Gordon & Co. and JPMorgan Chase Bank.

"We are pleased to be able to put before the court and our creditors the previously announced settlement of LBO claims in a plan 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," Don Liebentritt, Tribune's chief restructuring officer, said in the release.

"In addition, we believe this plan has broad support within the senior lender class, including from an ad hoc group of lenders called the credit agreement lenders, which collectively represents approximately $5 billion of initial and incremental term loans," he said.

Oaktree and Angelo Gordon are part of the ad hoc group, according to the release.

Settlements

According to its disclosure statement, Tribune's plan has two primary components. First, the plan provides for settlements of LBO-related causes of action held by Tribune's estates against current and former senior lenders, the senior loan agent and the senior loan arrangers, participating current and former bridge lenders and bridge loan arrangers ,and the step one selling stockholders.

Significant portions of the distributions to be made to holders of senior noteholder claims, other parent claims, convenience claims and general unsecured claims against the filed subsidiary debtors are on account of these settlements, according to the disclosure statement.

In particular, the aggregate additional distributions to these classes is about $401 million of cash under the settlement.

In addition, the plan provides for a step two/disgorgement settlement against the settling step two payees, which are comprised of current and former senior lenders, bridge lenders or step two arrangers who received payments prior to the date of the company's bankruptcy filing on account of the incremental senior loans or bridge loans and who elect to participate in the step-two/disgorgement settlement.

The holders of senior noteholders claims will receive an additional $120 million of cash consideration on account of the step two/disgorgement settlement.

In the event there is insufficient participation in the step two/disgorgement settlement to yield $120 million of additional cash, the step two arrangers have agreed to advance the cash necessary to fund the shortfall, subject to being reimbursed by the proceeds of the litigation trust recoveries with respect to the claims.

Second component

A second component of the settlement plan calls for the preservation of Tribune's estate's remaining LBO-related causes of action for the benefit of the company's creditors and the assignment of those causes of action to the litigation trust and the creditors' trust.

The company said the transfer of such causes of action to the trusts will allow it to emerge from bankruptcy and continue its on-going business operations largely uninterrupted by the costs and distraction of the litigation surrounding the LBO-related causes of action.

Under the settlement, holders of impaired allowed claims against Tribune other than securities litigation claims will receive beneficial interest in the trusts and the right to participate in the trusts' recoveries.

According to the disclosure statement, the beneficial interest granted to holders of senior noteholder claims, allowed PHONES notes claims, EGI-TRB LLC notes claims and electing holders of allowed other parent claims will provide such holders with their share of: the first $90 million realized from net creditors' trust proceeds and net litigation trust proceeds and, thereafter, the repayment of the trusts' loan; 65% of both the net litigation trust and net creditors' trust proceeds until their claims are paid in full.

Holders of allowed PHONES notes claims and EGI-TRB LLC notes claims will participate in the parent GUC trust proceeds.

The remaining 35% of the trusts' recoveries will be provided to holders of senior loan claims.

Creditor treatment

Under the plan:

• Holders of senior loan claims will receive their share of 1.5% of the remaining distributable cash, 1.5% of the new senior secured term loan and 1.5% of the new common stock. Additionally, they will receive their share of 71.64% of the remaining bridge loan reserve.

They will also receive litigation trust interests and, if the holder has not opted out of the assignment included in the settlement, they will receive creditors' trust interests as well.

• Holders of allowed senior guaranty claims will collectively receive 98.5% of the new senior secured term loan, 98.5% of the remaining distributable cash and 98.5% of the new common stock;

• Holders of bridge loan claims will receive their share of the bridge loan distribution amount , and, if the holder has not opted out of making the assignment provided under the settlement, a share of the creditors' trust interest and a share of the litigation trust interests;

• Holders of senior noteholder claims will receive their share of $300 million in cash, the proceeds of the step two/disgorgement settlement in cash, 23.51% of the remaining bridge loan reserve, their litigation trust interests, and, if they have not opted out of making the assignment provided under the settlement plan, a share of the creditors' trust interests;

• Holders of other parent claims may elect to receive either cash equal to 35.18% of their claim and their share of 4.85% of the remaining bridge loan reserve or cash equal to 32.73% of their claim, their share of the 4.85% of the remaining bridge loan reserve, and, if they have not opted out of making the assignment provided under the settlement, their share of trust interest and their share of litigation trust interests;

• Holders of EGI-TRB LLC note claims and PHONES note claims will receive their share of the litigation trusts and if the holders has not opted out of making the assignment provided under the settlement, a share of the creditors' trust interests;

• Holders of subsidiary debtor general unsecured claims will receive cash equal to the less of 100% their claim or their share of $150 million.

Higher operating cash

Tribune also noted in Monday's news release that the company expects its operating cash flow for full-year 2010 to be $617 million, approximately $123 million higher than in 2009.

Under Tribune's proposed plan, the company expects to continue its recently implemented employee retirement plan.

Its employee-stock ownership plan would terminate and the shares held by the plan and in employee accounts would be extinguished.

Tribune, a Chicago-based media company, filed for bankruptcy on Dec. 8, 2008. Its Chapter 11 case number is 08-13141.

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