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TRIBUNE CREDITORS FILE CH. 11 PLAN; NEW PHILLY AUCTION Hedge funds plan in case mediation fails; Philadelphia sale on Thursday.

Three complex newspaper business bankruptcies continued to vex their debtors, their managements and their employees last week, as two leading creditors of Tribune Co. elected to file their own plan for the multimedia company to exit Chapter 11, the judge in the case of two Philadelphia dailies and their web site laid out the rules for a new auction of the properties and a leading newspaper broker said it was shopping around the remnants of an Ohio newspaper company.

Tribune creditors Oaktree Capital Management and Angelo Gordon & Co. filed their reorganization plan on Friday; management had lost its right to exclusively propose an exit plan when other creditors failed to back its plan late last month and an 18-month deadline for exclusivity expired.

The hedge funds said they were filing the plan as a backup against their hope that a mediator who has been appointed in the case cannot work out a deal that meets the desires of all the parties. Tribune filed for Chapter 11 in Delaware in December 2008, a year after it had been through a leveraged buyout that took the company private. It listed $13.7 billion in liabilities and $7.6 billion in assets at the time.

Complicating the Tribune bankruptcy in recent weeks has been the fallout of a July report by a special bankruptcy examiner, who said in all likelihood Tribune managers lied to banks that were putting up $2.1 billion in the second part of the leveraged buyout in 2007 about the company's projected cash flow.

Bloomberg News reported today that the Oaktree-Angelo plan is 79 pages long, with 216 single-spaced pages that give further details and an uncounted number of exhibits and schedules. The plan, said Bloomberg, sets up a separate reorganization for the Tribune parent company and each of the individual operating units, and suggests that some units may emerge from Chapter 11 while the parent and other divisions might remain in bankruptcy.

In other Tribune news, a group of unsecured creditors is preparing to sue the company regarding the managers who lied to garner the $2.1 billion loan. The unsecured creditors committee, which includes Deutsche Bank and Warner Bros., filed a motion with the bankruptcy court last week to gain legal standing.

In their filing, the creditors said that Tribune's current management and directors cannot be trusted to file the suit on their own. The unsecured creditors said they would not start their suit during the mediation.

The Tribune mediation is scheduled to start next Sunday.

Judge Kevin Carey set Oct. 22 for a hearing on the creditors motion.

Lastly in Tribune news, Judge Carey allowed the company's special board committee to have its own law firm. The U.S. trustee for the bankruptcy had objected to the notion that the Chicago law firm Jones Day be retained, as she said she believed that it would be duplicating work being done by the company's existing firms, Chicago's Sidley Austin LLP and New York City's Cole Schotz Meisel Forman & Leonard PA and that another firm would needlessly drive up the legal costs of the bankruptcy.

Judge Carey said hiring Jones Day was "absolutely the right thing to do," reported Crain's Chicago Business.

In Philadelphia, the judge in that city's newspaper bankruptcy ruled last Tuesday that because the previously successful bidder for the operations of the Inquirer, the Daily News and was unable to cut a deal with one of the 16 unions at the operations, a new auction would be held, this Thursday.

Under the new auction's rules, the company's creditors will not be able to use their $318 million in debt as part of their auction bid, that they must offer at least $50 million, bidding will be in $100,000 increments and that a 15 percent cash deposit of $7-1/2 million, will be required to get in the door.

The $318 million in debt ended up being the ace-in-the-hole for the winning bidders, a group of creditors that included Angelo Gordon & Co., Credit Suisse and Alden Global Capital. The group, which now calls itself the Philadelphia Media Network, was ready to take over the businesses on Sept. 1 but was unable to garner a contract with the truck drivers union, a local of the Teamsters International.

Under the new auction rules, regardless of whether or not union deals can be cut, the winner will be the winner.

The Inquirer reported last week that while a number of groups were performing due diligence on the businesses, only the original auction winners, Philadelphia Media Network, had publicly acknowledged they would bid on the businesses.

Lastly in newspaper bankruptcy news, the newspaper broker Dirks, Van Essen & Murray of Santa Fe, N.M., reported last week that it had been engaged to find a buyer or buyers for what remains of Brown Publishing Co., which entered Chapter 11 earlier this year.

A group of managers won the auction for the firm but the banks that were funding their bid backed out of the deal in August. Now the firm is seeking to sell 14 dailies, "numerous weeklies" and 112 business journals throughout the Midwest. Ohio's Van Wert Times Bulletin and Dan's Papers of Long Island, N.Y., have already been sold.

Latest guesstimates: Tribune exits Chapter 11 in late 2011, while the Philly papers will squeak out just before we enter 2011.
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Date:Sep 20, 2010
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