Tribune restructuring plan approved
BY DAVID ROEDER AND STEVE WARMBIR Staff Reporters July 13, 2012 5:16PM
The Chicago Tribune at 435 N. MIchigan Avenue is photographed on Friday, June 8, 2012. | Richard A. Chapman~Sun-Times
Updated: August 15, 2012 6:04AM
Within a few years, the media giant that owns the Chicago Tribune, WGN TV and Radio, and many other newspapers and television stations across the country, will look nothing like it does today.
A federal bankruptcy court judge on Friday approved a restructuring plan for Tribune Co., a critical step as the company emerges from bankruptcy and heads toward the inevitable process of selling off its assets.
After a 3 1/2 year legal battle, the ruling by U.S. Bankruptcy Judge Kevin Carey hands control of the company to primary debt holders led by JPMorgan Chase & Co., and hedge funds Oaktree Capital Management LP and Angelo, Gordon & Co. On Friday, Carey overruled remaining objections to the plan by creditors and after final revisions said he will confirm it.
Carey’s decision means Tribune’s prolonged bankruptcy case is drawing to a close, but it does not result in an immediate exit from Chapter 11.
The ruling won’t mean quick changes in management at the Chicago-based media giant since the Tribune has one more major hurdle to clear before the bankruptcy is finalized, which will take several months at least.
First, the company must go before the Federal Communications Commission and ask for its TV station licenses to be transferred to the new owners.
If the FCC were to withhold approval, the bankruptcy settlement would be scotched. A source, though, said an FCC denial is unlikely because the commission approved the license transfers when the company was sold to Chicago real estate tycoon Sam Zell in 2007.
The FCC process could take two or three months. Once it occurs, Tribune’s new owners would install a new board and managers. Tribune has said it hopes for formal emergence from Chapter 11 by the end of the year, though it has consistently blown its deadlines before.
Media industry analysts agreed the new owners are not interested in being investors for the long haul and want to get the most money possible from selling off the Tribune’s crown-jewel media properties and other, lesser assets.
“We know these owners want out,” said news industry analyst Ken Doctor, author of Newsonomics.
“There is not a market logic for the Tribune media company to exist three years from now,” Doctor said.
In addition to the Chicago Tribune and WGN, Tribune Co. owns the Los Angeles Times, the Sun of Baltimore and five other prominent newspapers. Its profit center and most valuable assets, however, have been its 24 television stations in cities throughout the U.S., especially WGN.
Expect the new owners to test what the market will pay for its variety of properties, including whether it makes sense to sell some of them together, such as a television station and newspaper in the same city.
Tribune “is a valuable company,” said media industry analyst Alan Mutter, a former Sun-Times city editor and author of the respected industry blog, “Reflections of a Newsosaur.” “It wasn’t worth what Sam Zell paid for it. But it has been and always will be a valuable company. There’s no need for a fire sale it seems to me.”
While the value of newspapers has collapsed in recent years, not everyone is thumbing their noses at them.
Warren Buffett, the highly respected investor, recently bought 63 daily and weekly newspapers from Media General Inc. and told Bloomberg Television on Friday that he’s interested in buying more.
“We don’t go out searching for them at all, they come to us,” Buffett said.
Another billionaire investor, Eli Broad, reiterated his intention earlier this year to form a group of investors to buy the Los Angeles Times.
The Tribune bankruptcy case was inordinately complex, featuring warring groups of creditors. Some were emboldened to pursue claims because of a 2010 report by an outside examiner that concluded top executives at Tribune engaged in “intentional fraud” to close the sale for Zell.
Zell had purchased the company for $8.2 billion in 2007, but the deal left it with $13 billion in debt just as changes in technology started reducing advertising in traditional print media. The company no longer generated enough cash to cover the debt as well as operations.
The restructuring plan, proposed by Tribune and backed by the major creditors, has been modified at least three times to meet objections.
Financial reports submitted as part of the bankruptcy show Tribune-owned newspapers still operating mostly at a loss. The broadcast side is mostly profitable, but with some big exceptions.
The company’s latest financial report, submitted to the court in mid-June, showed that since it entered bankruptcy in December 2008, it has posted losses of $2 billion. Its most recent monthly reports have shown slight profits.
Its most profitable division during the bankruptcy has been WGN Continental Broadcasting Co., the report showed. It has had net income of $445.4 million since December 2008.
Big losers during that period have been the operating companies for the Los Angeles Times, down $230.8 million; and the Chicago Tribune, down $74.9 million. In the Tribune’s case, the deficits are piling up while losses at the Los Angeles Times have been largely plugged.
However, the company has reported losses at TV stations on the West Coast and in St. Louis.
Contributing: Francine Knowles