By RUSSELL ADAMS, JOANN S. LUBLIN And DEE PATNEY
Tribune Co. late Friday filed a reorganization plan backed by its leading creditors, taking an important step toward completing a nearly two-year slog through bankruptcy.
Tribune's Quest for Bankruptcy Exit
See key developments since the company filed for Chapter 11 bankruptcy protection almost two years ago.
The filing came just a few hours after the resignation of Chief Executive Randy Michaels. Together, the moves signal the beginning of the end of perhaps the darkest chapter in the media company's 163 years.
The plan incorporates the terms from two previously announced settlement pacts by the company's unsecured creditors and leading lenders. It would hand ownership of the company to holders of its senior loans, led by J.P. Morgan Chase & Co., Angelo Gordon & Co. and Oaktree Capital Management.
Senior bondholders would receive $420 million, or about 33%, of what they are owed, plus a stake in a trust to fund lawsuits stemming from the buyout.
Terms of the plan filed Friday night are more generous to bondholders than a previous proposal.
The plan still must get approval from the court and creditors of the company.
Questions about the circumstances of Sam Zell's $8.2 billion deal in 2007 to take Tribune private have complicated and extended the bankruptcy proceedings. Over the summer, a court-ordered probe concluded it is "highly likely" that the second step of financing for the deal rendered Tribune insolvent.
The findings emboldened unhappy creditors, some of whom have signaled plans to bring legal action against parties involved in the original deal. To keep potential litigation from further delaying the proceedings, certain potential legal claims were set aside in a trust under the latest plan.
Earlier Friday, a bankruptcy judge granted Tribune's official committee of unsecured creditors the right to sue some of the parties that helped engineer the ill-fated buyout.
The resignation of Mr. Michaels, who has run Tribune since late last year, was hastened by tales of boorish behavior and a hostile corporate culture his team is said to have fostered. The board voted to replace Mr. Michaels with a four-man executive council comprised of current Tribune executives, a temporary arrangement designed to bring a measure of stability to the company while it tries to emerge from bankruptcy.
Mr. Michaels' departure shifts more of the focus to a task Tribune's creditors?and future owners?have been quietly working on since the summer: finding new leadership to steer the company post-bankruptcy.
The creditors have been casting about for new leadership since the summer. Recruiters Spencer Stuart proposed several potential candidates, including former News Corp. executive Peter Chernin and former Walt Disney Co. Chief Executive Michael Eisner, according to a person familiar with the situation.
News Corp. owns Dow Jones & Co., publisher of The Wall Street Journal.
More recently, creditors spoke informally with Spencer Stuart about "who might be available" to fill the CEO spot, this person said.
Mr. Chernin's spokesman said he isn't interested in the CEO job. He declined to comment on whether Mr. Chernin was approached about or is interested in becoming chairman. Mr. Eisner, who invested in Tribune debt, has repeatedly dismissed speculation that he was in talks about becoming chairman of the company.
Until a few weeks ago, Mr. Michaels was expected to stay on at least until Tribune's exit from bankruptcy. Then a series of recent revelations about the culture at Tribune under Mr. Michaels' management team depicted a hostile environment plagued by inappropriate behavior. The final straw for the board was a memo sent by Mr. Michaels' chief innovation officer, Lee Abrams, that linked to a fake news video labeled "sluts" and showing nudity. Mr. Abrams apologized and subsequently resigned, but the controversy compelled the board to cut Mr. Michaels' tenure short.
The new executive council is comprised of Tony Hunter, publisher of the Chicago Tribune; Eddy Hartenstein, publisher of the Los Angeles Times; Nils Larsen, chief investment officer at Tribune; and Don Liebentritt, Tribune's chief restructuring officer. In addition, Mr. Larsen has been named chairman of Tribune Broadcasting.
"These appointments are designed to ensure a smooth, seamless transition of management responsibilities to a group of experienced executives who have a strong understanding of the company's media businesses," Mr. Zell said in a statement.
Write to Russell Adams at russell.adams@wsj.com, Joann S. Lublin at joann.lublin@wsj.com and Dee Patney at deepak.patney@dowjones.com
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