NEW YORK Tribune Co filed a reorganization plan late on Friday that will turn over control of the bankrupt newspaper publisher to its leading creditors including JPMorgan Chase & Co, Angelo Gordon & Co and Oaktree Capital Management.
The plan signals an important step toward the recovery of the media company -- which owns the Los Angeles Times and the Chicago Tribune -- from what Sam Zell, the real estate developer and architect of the 2007 leveraged buyout, called "the deal from hell."
Zell took the 163-year-old publisher and owner of 23 television stations private in a 2007 deal that loaded the company with more than $8 billion in debt. It filed for bankruptcy a year later, buckling under the weight of a heavy debt load and a severe decline in advertising revenue.
The reorganization plan was made public just hours after chief executive Randy Michaels, under fire from reports that he tolerated a sexist and hostile workplace, resigned.
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.
Larsen was also named chairman of Tribune Broadcasting.
However, the new management is unlikely to serve more than a few months.
Creditors have been in contact with media executives including Peter Chernin, former chief operating officer of News Corp, to become chairman, people familiar with the discussions said.
The new agreement combines two previously announced settlement offers from leading lenders and a group of unsecured creditors.
Some bondholders would receive $420 million, or 32.73 cents to the dollar, and interest in a litigation trust.
The plan requires the approval of the court and creditors.
The company expects operating cash flow for the full year 2010 to be $617 million, or $123 million higher than 2009.
U.S. Bankruptcy Judge Kevin Carey ruled on Friday to let a committee of unsecured creditors sue Zell, other executives and advisers.
Bondholders opposing the reorganization plan are girding for a fight.
Daniel Golden, an attorney representing hedge fund Aurelius Capital Management LP, said on Friday they planned to file a rival plan next week. Aurelius is among the largest holders with $1.3 billion of senior Tribune bonds.