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TRIBUNE CREDITORS FILE THREE COMPETING PLANS FOR CH. 11 EXIT And one of the creditor groups files a suit against Tribune's banks.

As anticipated, three groups of Tribune Co. creditors filed competing plans proposing ways for the company to exit bankruptcy on Friday, just getting under the wire for a deadline the Chicago-based company's Chapter 11 judge had set. Also as previously assumed, a group of senior lenders filed suit against the banks that provided loans for the second portion of the company's 2007 leveraged buyout. The suit also was filed on Friday, just making a deadline.

The three plans will be weighed by the Delaware bankruptcy court as well as by the company's creditors against a plan first filed by the hedge funds Oaktree Capital Management and Angelo, Gordon & Co. in August. Over the last two months, the bank JPMorgan Chase & Co., the official committee of unsecured creditors and Tribune's management have signed onto the Oaktree/Angelo Gordon plan.

All four plans seek to get the company out of bankruptcy as soon as possible and differ only in the ways they handle the ultimate ownership of the business as well as liability for the so-called second-step of the 2007 leveraged buyout. A bankruptcy court examiner in July found that during this second set of loans, the company may have misled potential lenders about its deteriorating financial picture and as such, the result may have been doomed the company to bankruptcy. Tribune filed Chapter 11 almost exactly one year after the buyout.

The three plans filed on Friday were drafted by Aurelius Capital Management, a hedge fund that owns bonds that were issued to Tribune prior to the leveraged buyout; Marathon Asset Management LP and King Street Capital LP, which hold Tribune bridge loans, and a group of dissident senior lenders that include the hedge funds Alden Global Capital and Greywolf Capital.

It is this last group -- which holds about $767.7 million of the $8.3 billion buyout deal -- that also filed Friday's lawsuit in New York State Supreme Court in Manhattan. Their suit, which won't be litigated until after the company exits bankruptcy, contends that what the bankruptcy examiner in July said "may" have happened really did happen. The complaint says that the banks involved in the second part of the buyout knew that the additional $3.7 billion in loans would submerge the company but went ahead anyway in order to get their fees.

The suit names JPMorgan, Bank of America Corp. (and its subsidiary Merrill Lynch Capital Corp.) and Citigroup Inc. as defendants. "The lead banks knew that this financing was barred by the terms of the credit agreement and it was tainted with fraud and other misconduct," says the lawsuit.

The Chapter 11-exit plans will be reviewed by Tribune's bankruptcy judge, Kevin Carey, who will undoubtedly require multiple hearings to review the legal validity of each. Once he's determined whether any or all of them meet that basic criteria, then he will send them out to the company's creditors for a vote. When the votes come in, Judge Carey will then decide -- using his own judgment and guided by the voting -- which one to implement.

In other Tribune Co. news, the managers currently running the company -- after last month's resignation of Chief Executive Randy Michaels -- sent out a memo to Tribune staffers last Monday suggesting that the company's finances are in pretty good shape.

"The company expects operating cash flow for full-year 2010 to be $617 million, approximately $123 million more than last year," said Monday's memo from Don Liebentritt, Nils Larsen, Tony Hunter and Eddy Hartenstein, who are the "executive council" running Tribune. The first two are longtime financial executives appointed by Michaels and the last two are the publishers of the Chicago Tribune and Los Angeles Times, respectively, also given their jobs by Michaels.

The memo went on to say that consolidated operating cash flow is up 39 percent compared to last year and that cash expenses are down six percent.

"Consolidated operating cash flow margin for the first three quarters of 2010 increased to 18 percent from 13 percent compared to the same period in 2009," the memo stated.

Let's see: figure four hearings per plan and one hearing per week (Judge Carey's courtroom is a busy place and Tribune can't take up all his time) and the plans won't go out to vote until February at the earliest. And then there's another month for voting and another month for cogitation on the voting. Looks like Tribune's Chapter 11 will last for at least 30 months. Oh, and the lawyers will still get paid while the newspaper people still won't get cost-of-living raises.
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Date:Nov 1, 2010
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