NEW YORK Media group Tribune Co has arranged an untraditional financing deal with Barclays Capital, involving about $350 million in debt agreements, to fund operations during its reorganization.
The publisher of the Chicago Tribune and Los Angeles Times filed for Chapter 11 bankruptcy protection on Monday, citing weakness in the newspaper industry and a need to restructure about $13 billion in debt.
Unlike a typical debtor-in-possession bankruptcy loan, the company is seeking court approval of a $50 million letter of credit from Barclays, according to court documents filed late Monday in U.S. Bankruptcy Court in Delaware.
Tribune also wants approval to continue using a $300 million trade receivables facility it entered into with Barclays in July. The company has an outstanding balance of $225 million on the facility, which was amended for the bankruptcy, and Tribune is seeking to guarantee that obligation.
"It's a somewhat unusual structure for the financing, but given the state of the credit markets we're probably going to see more creative moves to finance bankruptcies," said Stephen Lubben, a bankruptcy professor at Seton Hall University School of Law in New Jersey.
Tribune said the facility would "ensure sufficient liquidity and continuity of operations" during the bankruptcy.
Under the trade receivables facility, Barclays does not loan directly to the bankrupt parent company, but to a borrower known as Tribune Receivables LLC, which receives about 80 percent of the company's incoming cash receipts and was not placed into bankruptcy, court papers showed.
The facility was amended for the bankruptcy filing and is set to last 120 days, according to the court papers.
A court hearing to address the matter and Tribune's other first day motions is scheduled for Wednesday in Delaware.
In 2007, real estate tycoon Sam Zell led a buyout of the company for $8.2 billion. Barclays was also one of the lenders on an $8.028 billion senior credit facility Tribune entered into around the time of the buyout. Other lenders on that loan included JPMorgan Chase, Merrill Lynch, Citigroup and Bank of America.
(Reporting by Emily Chasan, editing by Matthew Lewis and Andre Grenon)