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Tribune Co. again delays bankruptcy reorganization plan

The media conglomerate seeks another month's extension to negotiate terms with creditors.

April 01, 2010|By Michael Oneal

With the clock ticking down, Tribune Co. bought more time to negotiate with its fractious creditors Wednesday when it filed a motion in Delaware Bankruptcy Court to extend until April 30 its exclusive right to propose a reorganization plan in its 15-month-old Chapter 11 case.

Any extension of the "exclusivity period" requires a judge's approval. But the move takes advantage of a quirk in Delaware law that allows Tribune to file the motion and essentially freeze exclusivity until the next scheduled court hearing April 13.

Tribune Co., which owns the Chicago Tribune, the Los Angeles Times, KTLA-TV Channel 5 and other media properties, had already filed four extensions in the case while attempting to broker a compromise between its sparring senior creditors and junior bondholders. Its most recent extension was set to run out Wednesday.

Several people close to the negotiations said the goal was still to have an agreement before the April hearing, perhaps in the next few days.

Tribune's options had been to file a plan that would take sides with one group of creditors against the other or to propose an official compromise solution that ran the risk of angering everybody, sources said.

Company management and lead counsel Sidley Austin have been consistent in saying they'd like to reach a consensual plan to recapitalize the company. Now they've given themselves at least 13 more days to see if that's possible.

Tribune won't comment on negotiations, but the general architecture of a proposed restructuring plan hasn't changed significantly since the middle of last year, sources said. Saddled with $13 billion in debt incurred largely to finance a 2007 leveraged buyout led by real estate magnate Sam Zell, Tribune has proposed swapping most of the debt for equity in a newly public, unburdened company.

Negotiations have focused on how that equity would be divided.

Senior creditors -- banks including JPMorgan Chase that lent more than $8.6 billion to the deal, as well as countless hedge funds and distressed debt investors who bought pieces of those loans on the secondary market -- have long contended that Tribune's value has fallen well below $5 billion, meaning their claims, being senior, should be satisfied first.

But two groups of junior bondholders with more than $2 billion at stake object, saying they were improperly subordinated to the senior lenders.

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