Tribune Strikes Deal To Exit Bankruptcy

The long, tortuous Tribune Co. bankruptcy appears to be nearing its end, with an announcement late Thursday that the company has reached a deal with its creditors on its bankruptcy reorganization plan.

If the plan is approved by the U.S. Bankruptcy Court for the District of Delaware, Tribune should be able to exit Chapter 11 sometime in the next couple months -- ending 18 months of painful wrangling under bankruptcy protection.

The bankruptcy reorganization agreed to by lenders would give junior lenders, including Centerbridge partners, 7.4% of Tribune's "distributable" value in the form of cash, stock and new debt.

Senior credit facility lenders, including J.P. Morgan and Angelo Gordon, would take most of the rest of the company -- including cash, debt and stock equal to over 91% of the company's equity. The agreement was also approved by Tribune's Official Committee of Unsecured Creditors.

The agreement would appear to resolve a legal battle between the senior creditors and junior lenders, who threatened to derail or at least draw out the bankruptcy proceedings at great expense.



The legal sally was effectively an attempt by junior lenders to get more money than they would under the terms of the bankruptcy reorganization then proposed by Zell's management team and senior lenders. With the agreement to pay them 7.4% of the company's distributable value, this dispute has apparently been resolved.

The deal also would seem to signal the end of another legal challenge by unsecured creditors. In February, unsecured credtiors sought permission from the bankruptcy court to challenge the legality of the original deal, engineered by Sam Zell in 2007, to take the company private as an employee-owned company.

The unsecured creditors alleged that relevant parties, including Zell and the previous owners of the company, knew that the transaction was bound to be insolvent, leading to bankruptcy. This would make it a "fraudulent conveyance" and therefore illegal, which would also cancel the current bankruptcy proceedings.

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