The Work

October 12, 2010 3:19 PM

Tribune, Creditors Reach Agreement on Reorganization Plan

Posted by Brian Baxter

After almost two years of Chapter 11 proceedings, the Tribune Company has reached an agreement with a group of senior lenders and unsecured creditors that could pave the way for the media giant's exit from bankruptcy.

Dow Jones Newswires reports that Tribune will file a reorganization plan on Friday that will incorporate both settlement pacts. The deal allows for Tribune's bondholders to receive $420 million and calls for the creation of a litigation trust for the company's creditors, according to Dow Jones. The first $90 million in recoveries from the trust will be allocated to Tribune's unsecured creditors, including bondholders.

Among those joining the settlement that Tribune had previously reached with two hedge funds are JPMorgan Chase and unsecured creditors, Reuters reports.

Tribune has struggled to appease rival groups of creditors and cobble together a reorganization plan that will allow the Chicago-based company to expedite its Chapter 11 exit. As the company has languished in bankruptcy court, embarrassing allegations have emerged against Tribune's management, stemming from a disastrous $8 billion leveraged buyout in 2007.

But Tribune's tough times might not be over yet. The Los Angeles Times, a Tribune paper, reports that several key junior creditor groups, including New York-based hedge fund Aurelius Capital Management, have not yet agreed to drop their opposition to a settlement and could file their own rival reorganization plans by a court-imposed October 15 deadline.

The Am Law Daily reported last month that Tribune's lead bankruptcy lawyers from Sidley Austin had billed the company for $21.7 million since it entered Chapter 11 proceedings. Chadbourne & Parke, which represents Tribune's creditors committee, has billed the bankrupt estate for $17.8 million. The legal tab for the committee's special litigation counsel from Zuckerman Spaeder stands at $3.7 million.

Last month Tribune also brought Jones Day on board--despite the protests of the U.S. trustee overseeing the company's Chapter 11 case--to serve as counsel to four independent directors.

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