Tribune Co. Has a Deal to Exit Chapter 11

JPMorgan Chase joins major creditors in a multi-million-dollar agreement to settle the two-year bankruptcy

It looks like they have a deal — if everyone plays nice.

The Tribune Company has reached a settlement and reorganization with major creditors in its 22-month bankruptcy case, the company announced Tuesday. If it goes through, it could see the troubled media giant finally in the clear.

Endorsed by the Chapter 11 mediation judge, the wide ranging deal with the Committee of Unsecured Creditors, OakTree Capital Management and Angelo, Gordon & Company is significant at this stage in the proceedings because it sees longtime hold-out JPMorgan Chase back at the table and seemingly on board.

As part of the proposal, JPMorgan Chase and other senior lenders have agreed to contribute $120 million in cash to bondholders. When factored in with additional contributions by holders of senior Tribune loans, this would bring the company’s creditors’ financial return to about 32.73 cents on the dollar, or $420 million, the company said.

In its announcement Tuesday, Tribune said it would be meeting the Delaware bankruptcy court- ordered deadline of Friday to file the new plan and the necessary disclosure statement.

“This deal with Angelo means real pieces are moving in a place in a real deal,” a New York financial analyst who has been closely following Tribune’s problematic process told TheWrap. “But there are a lot of legal issues and details that could scuttle it in a second.”

One such scuttling could occur if smaller creditors such as Aurelius Capital Management decide the new deal is not to their liking. The New York-based hedge fund is well known to be litigious and seems certain to submit its own reorganization plan throwing a spanner in Tribune’s latest works. Others could join the bondholder or submit plans of their own as well meaning more mediation and more months in court.

Tribune has been in Chapter 11 since December 2008 — less than year after Chairman Sam Zell took the company private in a $8 billion buyout that an independent examiner’s report this summer called out for  “dishonesty.”

“We are supportive of the settlement and appreciative of the leadership of Judge Kevin Gross, who has been overseeing our mediation,” said Tribune CEO Randy Michaels in an email sent to company employees early Tuesday.

Michaels, who was pilloried in a recent New York Times piece on the antics of Tribune’s upper management, added, “along with the settlement agreement announced two weeks ago, which the UCC and JP Morgan have also joined, we continue making progress in resolving our Chapter 11 cases.”

The new agreement, based in great part on a plan submitted on Sept 28 by New York hedge funds and Tribune creditors OakTree Capital Management and Angelo, Gordon & Company, also would lay to rest many legal claims arising from the 2007 privatization move by Zell and others.

Efforts to contact JPMorgan Chase and Angelo, Gordon & Co. were not returned immediately. One of the largest senior creditors in the case, the latter was co-founded by John Angelo, a close friend of former Disney CEO Michael Eisner, who has been tagged as a potential replacement for Zell as Tribune chairman.