Tribune CEO quits after hostile workplace reports

WILMINGTON, Delaware (Reuters) - Bankrupt newspaper publisher Tribune Co replaced its chief executive on Friday after a series of embarrassing news stories emboldened critics who said he tolerated a sexist and hostile workplace.

The owner of the Chicago Tribune and Los Angeles Times said Randy Michaels offered to resign and the board would transfer his duties to a four-member committee.

Michaels was brought to Tribune by Sam Zell, the real estate developer who bought the company in 2007 with billions of dollars of debt. The company filed for bankruptcy less than a year after the takeover that Zell has called "the deal from hell."

Zell's management has clashed with unions whose members are bitter about pay freezes while executives have reaped performance bonuses. The unions said thousands of layoffs made those bonuses possible.

Michaels became a target of that opposition following a recent New York Times story that quoted numerous employees who were upset at pervasive sexual banter and profanity among the managers.

A Michaels ally, Lee Abrams, resigned his job as chief innovation officer earlier this month after sending staff an email containing a link that some found offensive.

One link cited in a Chicago Tribune report was to an online video called "sluts," which featured female nudity.

Michaels was replaced by a committee of Don Liebentritt, the company's chief restructuring officer; Nils Larsen, its chief investment officer; Tony Hunter, the CEO of Chicago Tribune Co; and Eddy Hartenstein, the CEO of Los Angeles Times Communications LLC.

In addition, Larsen was been named Chairman of Tribune Broadcasting.

However, the new management is unlikely to serve more than a few months.

The company will soon turn over ownership to the holders of its loans that funded Zell's buyout, and they have already begun looking for new faces for the executive suite.

Former News Corp executive Peter Chernin has had one preliminary discussion about the role of chairman with creditors, but no formal proposals have been made, according to people familiar with the talks.

RESTRUCTURING PLAN

Tribune was still expected later on Friday to detail its plan for settling billions of unpaid debts and ending its nearly two years in bankruptcy.

Tribune operates newspapers, 23 television stations and radio stations. Its emergence from bankruptcy would come in the midst of a recovering economy, and after elections boost ad revenue.

Helped by a mediator, Tribune has sketched out a plan to give ownership of the company to senior loan holders led by JPMorgan Chase & Co and hedge funds Angelo Gordon & Co and Oaktree Capital Management LP.

Those $8 billion in loans funded Zell's leveraged buyout (LBO), but the bankruptcy that soon followed rendered the company's pre-buyout bonds nearly worthless.

Outraged bondholders digging in to fight for a better deal.

"Obviously it should not be lost on the court that no pre-LBO creditor supports that settlement that emanated from the mediation," said Daniel Golden at a Friday court hearing.

Golden is an attorney with Akin Gump Strauss Hauer Feld LLP, which represents the hedge fund Aurelius Capital Management LP, which said it is one of the largest holders of $1.3 billion of senior Tribune bonds.

Bondholders were given ammunition for their fight this summer from a court-appointed examiner who determined the second part of Zell's two-step buyout was "somewhat likely" to be seen as an "intentional fraudulent transfer."

The examiner's report set up targets for bondholders' lawyers: $3.6 billion of loans, $4 billion of payments to selling shareholders and "substantial amounts of fees" paid to investment bankers.

Aurelius, which has a reputation for aggressive legal tactics, has indicated it wants to sue a variety of shareholders, officers, directors and advisers.

Tribune would normally file those lawsuits, but on Friday it agreed to transfer that right to the committee of unsecured creditors and eventually any unsettled claims will go to a litigation trust after the company exits bankruptcy.

Aurelius has different ideas. Their attorney Golden said Aurelius will submit its own reorganization plan next week.

The case is In Re Tribune Co, U.S. Bankruptcy Court, District of Delaware, No. 08-13141.

(Reporting by Tom Hals. Additional reporting by Kenneth Li and Jennifer Saba in New York and Sue Zeidler in Los Angeles. Editing by Gerald E. McCormick and Robert MacMillan)