Monday, November 21, 2011

Third Amended Bankruptcy Plan Filed by Tribune

From: Tribune Communications
Sent: Friday, November 18, 2011 7:56 PM
Subject: Message from Don Liebentritt/Third Amended Plan Filed Today

Late today we filed with the Delaware Bankruptcy Court a Third Amended Plan of Reorganization that we believe addresses the court’s concerns as expressed in its opinion last month and will allow the company to emerge from Chapter 11. The company’s amended plan continues to have the support of the Unsecured Creditors Committee, Oaktree Capital Management, L.P., Angelo Gordon & Co., L.P., and JPMorgan Chase as co-proponents. The company is requesting a confirmation hearing in February 2012. If confirmation is granted, regulatory approval will be sought soon thereafter.

In its October opinion, the court approved the $534 million settlement of certain claims arising from the company’s 2007 leveraged buyout. The amended plan continues to implement that settlement. The amended plan includes modifications that comply with the rulings and findings made by the court. The amended plan also includes an Allocation Dispute Protocol that would allow the court to address potential inter-creditor disputes regarding amounts that will be paid to various groups of creditors without interfering with or slowing down the company’s efforts to emerge from bankruptcy.

At the court-ordered status conference scheduled for Tuesday, November 22nd, the company will ask for a hearing in December, at which it will seek court approval of an accelerated timetable for approval of a Supplemental Disclosure Statement and a re-solicitation of votes limited to certain affected creditor classes.

We also filed with the court a Status Conference Report that provides some detail on the modifications in the Third Amended Plan and how we hope to seek its confirmation. That report is attached for your review, and it will be posted next week on the left-hand rail of Triblink.

An issue of concern to many employees was the Judge’s ruling against the protections in our plan for certain current employees whose Tribune stock was cashed out in the 2007 leveraged buyout transactions. You’ll recall that our creditors filed lawsuits seeking to “claw back” the cash that was paid to all Tribune shareholders in the 2007 transactions. Our plan sought to exempt from the Creditors Committee’s lawsuit (1) payments made on account of stock held in the 401(k) plans and, (2) for most current employees, up to $100,000 with respect to other shares. The Judge found our efforts laudatory, but not legally supportable, despite the record that was made at the confirmation hearing.

The amended plan filed today does not provide for these protections. We have been pressing this issue throughout the plan process, and have not abandoned these efforts. We are presently working with counsel for the Creditors Committee to establish a threshold below which recoveries will not be sought against current employees with respect to their stock proceeds. The Committee had previously supported a plan where the threshold was $100,000. Whether we can again get support for that, or some other number, or get support with respect to excluding proceeds from employee stock in 401(k) accounts, remains to be seen and we can make no promises.

If, and to the extent, we are successful, the protections would be brought to the court for approval by a motion filed by the Committee independent of the confirmation process for our amended plan of reorganization. In addition, and unfortunately, I must point out that any protection gained would apply only to the lawsuit filed by the Creditors Committee, and not to lawsuits filed by creditors themselves.

This means that issues relating to these claims seeking to claw back stock proceeds, like many others, may not be resolved prior to the company’s emergence from bankruptcy. While unfortunate, we believe this approach is consistent with the Judge’s clear direction in his opinion.

The text below is taken from an email sent to all employees in June. (There is additional information about these lawsuits on the left-hand rail of Triblink under the heading “Litigation Q&A.”)

“In December, 2010, the Official Committee of Unsecured Creditors in our Chapter 11 proceedings filed a lawsuit seeking to have all prior shareholders of Tribune Company repay the money they received on account of the stock that was purchased or cashed out in the LBO-Related Transactions. This lawsuit alleges that the payment of money to shareholders in conjunction with the LBO-Related Transactions was part of an “intentional fraudulent transfer” that harmed existing creditors of Tribune Company and should not have been made. The Creditors Committee’s lawsuit also sought 35 other types of relief against numerous other parties involved in the LBO-Related Transactions, along with a separate lawsuit against all the lenders involved in these transactions and subsequent parties holding the debt that was issued in these transactions. The Creditors Committee filed these lawsuits because the applicable two-year statute of limitations was about to expire.

Recently, additional lawsuits against prior shareholders of Tribune Company have been filed in numerous federal district courts and some state courts across the country. These lawsuits, which were filed by various creditors of Tribune Company, also seek to have certain prior shareholders of Tribune Company repay the money they received on account of the stock that was purchased or cashed out in the LBO-Related Transactions. These lawsuits allege that the payments to these shareholders were part of a “constructive fraudulent transfer” that rendered Tribune Company insolvent, undercapitalized and/or unable to pay its debts as they came due. We are informed that the lawsuits name (i) approximately 1,700 specific individuals and institutions as defendants and (ii) identify a class of defendants who are comprised of the remaining shareholders whose shares were purchased in conjunction with the LBO-Related Transactions. The individual creditors filed these lawsuits because the applicable four-year statute of limitations was about to expire.

Although the Bankruptcy Court has issued orders permitting these lawsuits to be filed (in order to preserve the causes of action because statutes of limitations were about to expire), the Court has also ordered that none of these lawsuits can be pursued by the plaintiffs at this time.

There are legal requirements that must be met for any of these lawsuits to be successful, and there are defenses that can be asserted to defeat these lawsuits. The parties that will ultimately be pursuing some or all of these lawsuits (including the lawsuits filed last year by the Creditors Committee), and the parties that will take the lead in defending these lawsuits, will depend on judicial decisions that have not yet been made about (i) which plan of reorganization will be confirmed in these Chapter 11 proceedings and (ii) which court(s) should end up adjudicating these lawsuits.”

The stay of these lawsuits is still in effect. We cannot give you legal advice about any of this, but will, from time to time, keep you apprised of further developments.

Don Liebentritt
Chief Restructuring Officer

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