Tribune’s financing plan gets court OK
WILMINGTON, DEL. — Tribune Co. passed an early hurdle in its Chapter 11 bankruptcy case Thursday when a U.S. bankruptcy judge signed a motion authorizing the continuation of a short-term financing arrangement worth $300 million.
Judge Kevin Carey also granted the company more time to file schedules of its assets and liabilities and other financial statements.
The financing arrangement, supplied by Barclays Bank and secured by Tribune receivables, will last until April. At that point, Tribune will have to renegotiate with Barclays or seek financing elsewhere.
The Chicago-based media company’s creditors agreed to the extension of the financing, in place before the bankruptcy, but several wanted to reserve the right to revisit that approval in April.
Sources close to the situation said that Tribune -- which owns the Chicago Tribune, the Los Angeles Times and KTLA-TV Channel 5, among other media properties, as well as the Chicago Cubs -- was fortunate to have access to financing in the current environment.
Because of the broader credit crisis, the market for the type of financing that protects new creditors while a company is in bankruptcy has dried up for many companies contemplating Chapter 11 filings, making it difficult for them to restructure their debts.
Tribune entered bankruptcy protection with a relatively strong cash position, and it generates significant cash flow from operations despite a severe fall-off in its advertising-supported businesses. Tribune’s debt structure allowed it to secure protection from all interest payments in bankruptcy, increasing its ability to generate cash and precluding the need for debtor-in-possession financing.
Carey, who also approved a $50-million letter of credit provided by Barclays, warned that he would probably object to a fee structure proposed by Tribune’s outside bankruptcy counsel, Sidley & Austin. A motion by Tribune seeking the court’s approval to hire Sidley said partners at the firm earned up to $1,100 an hour for their services. Carey said he would need to see hard proof that such a fee structure was reasonable.
Court filings show that Tribune expects to pay $156 million in “restructuring, interest and bank fees†during 2009.
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Tribune staff writer Ameet Sachdev contributed to this report.
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