NEW YORK (Reuters) - Tribune Co filed its bankruptcy reorganization plan on Monday, setting the U.S. newspaper publisher up for a showdown with a large group of lenders that called the terms “unfair” and demanded the right to propose a rival plan.
The publisher of the Chicago Tribune and Los Angeles Times and owner of television stations, including superstation WGN filed its Chapter 11 plan with the U.S. bankruptcy court in Wilmington, Delaware.
Tribune’s filing came four days after the company announced an accord with some creditors to resolve potential claims tied to its $8.2 billion leveraged buyout in 2007. The plan requires approval by U.S. Bankruptcy Judge Kevin Carey.
But on Monday, a group of roughly two dozen lenders, composed mainly of hedge funds who say they represent $3.6 billion of senior debt, said in a court filing it was “premature and misleading” for Tribune to announce an accord, which they called “dead on arrival” without their support.
Among the group’s members are distressed debt investor Oaktree Capital Management LP and Goldman Sachs Loan Partners.
Led by real estate investor Sam Zell, the 2007 buyout saddled Tribune with too much debt as the economy and advertising revenue declined and the Chicago-based company filed for bankruptcy protection on December 8, 2008.
Tribune said its reorganization plan would value the company’s equity at $4.1 billion, give senior credit facility lenders control of 91 percent of its stock, and allow it to emerge from Chapter 11 this year.
It also said approval could limit potential litigation after a bankruptcy process that has already cost it more than $100 million in professional fees.
In a statement, Zell called Monday’s filing “a significant and positive step forward,” while Chief Executive Randy Michaels said in an memo to employees that the plan “gets our capital structure in order and makes our debt manageable.”
But the dissenting lending group called the proposed accord with other creditors “impossibly tainted” by Tribune’s attempt to shield Zell and others from buyout-related claims.
Saying the accord gives a “free pass” to Zell, executives and creditors such as JPMorgan Chase & Co and bondholder Centerbridge Capital Advisors, the group sought court permission to offer a “fairer and less rank” alternative that does not shortchange them by at least $400 million.
They also urged the judge to reject Tribune’s effort to extend through April 30 its “exclusive” period to file a reorganization plan without creditor interference.
“This is a ‘settlement’ made possible with ‘other people’s money’ — specifically, that of the credit agreement lenders and other current holders of credit agreement claims left holding the bag,” the group said.
The lending group said it represents 42 percent of the $8.7 billion of claims under a secured credit agreement.
An official committee of unsecured creditors and distressed debt investor Angelo, Gordon & Co also support Tribune’s proposed settlement, while some junior bondholders oppose it.
JPMorgan spokesman Justin Perras declined to comment. Centerbridge did not return a request for comment.
Tribune said a May 20 hearing was set for Carey to consider approval of its “disclosure statement” for the Chapter 11 plan. Approval is needed before shareholders can vote on the plan.
The case is In re: Tribune Co et al, U.S. Bankruptcy Court, District of Delaware, No. 08-13141.
Reporting by Jonathan Stempel; additional reporting by Emily Chasan, Tom Hals and Robert MacMillan; editing by Robert MacMillan and Andre Grenon