Tribune strikes deal, headed toward bankruptcy

by Associated Press

Published: April 9,2010

NEW YORK — Tribune Co. said yesterday it has struck an agreement to head off some legal claims against the company and its lenders stemming from real estate mogul Sam Zell’s 2007 deal to take Tribune private.

The company said the agreement clears the way for it to file a reorganization plan in bankruptcy court in Wilmington, Del., before a hearing Tuesday.

Tribune, which publishes the Los Angeles Times, Chicago Tribune, Baltimore Sun and other dailies and owns TV and radio stations, has been in Chapter 11 protection since December 2008.

Some Tribune creditors that stand to take losses in the case have filed complaints saying the company and the lenders that helped Tribune go private knew the $8.3 billion leveraged buyout would pitch the company into insolvency by piling on too much debt.

Tribune said Thursday that it has come to an agreement with one such unsecured creditor, Centerbridge Partners, to settle any potential claims. Centerbridge, which holds 37 percent of Tribune’s outstanding bond debt, would get a 7.4 percent stake in Tribune, paid in a combination of cash, stock and debt if the court approves Tribune’s plan.

Tribune said J.P. Morgan and Angelo, Gordon & Co., two of the financial firms that stand to take over a 91 percent stake in the company under the plan, have also agreed to the settlement.

But it was not clear whether the deal will settle all the claims Tribune faces.

A separate group of creditors, represented by Wilmington Trust Co. and holding $1.2 billion in Tribune bonds, has also filed a complaint alleging Tribune’s banks engaged in fraudulent conduct by helping with the 2007 buyout. Messages left with lawyers for Wilmington Trust were not immediately returned Thursday.

Tribune spokesman Gary Weitman declined to comment. Messages left with J.P. Morgan, Angelo, Gordon & Co. and Centerbridge Partners were not immediately returned.