Tribune Co. CEO Resigns, New Bankruptcy Plan Filed
WILMINGTON, Delaware -- Tribune Co. CEO Randy Michaels resigned Friday amid tales of raunchy behavior as one of America's biggest media companies looked to shift attention back to its efforts to emerge from bankruptcy protection. Hours later, the company filed its latest reorganization plan in court.
Michaels' departure comes at a pivotal time for the troubled media company. After nearly two years operating under bankruptcy protection, Tribune Co. is drawing up a reorganization plan that it hopes a federal judge will approve before the end of the year.
Michaels, 58, joined Tribune Co. three years ago following an ill-fated $8.2 billion buyout engineered by real estate mogul Sam Zell in 2007. Michaels became Tribune Co.'s CEO late last year. The former radio disc jockey won Zell's trust as CEO of a radio broadcast company that Zell owned, Jacor Communications.
It seemed likely Michaels' reign was nearing an end anyway. Lenders in line to become the company's new owners will probably want to install their own management team once a bankruptcy reorganization plan gains approval.
Tribune Co., whose holdings include the Chicago Tribune, the Los Angeles Times and more than 20 television and radio stations, offered its latest plan just before a midnight deadline Friday in U.S. Bankruptcy Court in Wilmington.
It came nearly two years after the company filed for Chapter 11 bankruptcy protection, dogged by an industrywide decline in newspaper advertising revenue and debt totaling nearly $13 billion, mainly associated with the Zell-led buyout just a year earlier.
In line with a previously announced settlement with major creditors, Friday's plan promised to increase how much Tribune Co.'s bondholders would get compared with a previous proposal. Tribune is hoping that would be enough to win approval of the much-debated reorganization plan.
The earlier plan got derailed after an independent report found evidence of fraud in the leveraged buyout that led to Tribune Co.'s bankruptcy filing.
Friday's plan proposes a trust, financed by a $20 million loan from the company, that could pursue legal claims arising from the buyout. Earlier in the day, the judge overseeing the case gave the official committee of junior creditors permission to file lawsuits against some parties involved in the 2007 buyout. He gave them until Nov. 1 to file the complaints.
An independent investigator concluded this summer that some aspects of the deal had bordered on fraud. The lawsuits could allege that Tribune Co. wouldn't have had to file for bankruptcy protection if not for fraudulent conduct by Tribune's board members, including Zell, and by some of the company's financial advisers and lenders. Tribune Co. spokesman Gary Weitman declined comment on the possibility of lawsuits.
In exchange for relinquishing more money to Tribune Co.'s bondholders, senior lenders would be shielded from any legal claims tied to early stages of the Zell-led buyout.
The reorganization plan could still be derailed by other Tribune Co. creditors. The proposal has the support of major creditors -- JPMorgan Chase & Co., distressed debt specialist Angelo, Gordon & Co. and hedge fund Oaktree Capital Management -- as well as the committee of junior lenders. Tribune Co. has not said where some of the company's other lenders stand.
Messages left with attorneys for Aurelius Capital Management, which holds some of Tribune's senior bonds, and for Tribune's junior bondholders were not immediately returned Friday evening.
Once Tribune Co.'s bankruptcy plan is approved, the company is expected to be controlled by creditors who are getting ownership stakes in exchange for forgiving most of the debt incurred in Zell's buyout, which took Tribune Co. private. The debt holders in line to become Tribune Co.'s owners include JPMorgan Chase, Oaktree and Angelo, Gordon.
With new owners likely to appoint new leadership, a four-man executive committee will fill the void created by Michaels' departure in the meantime. The new bosses are Don Liebentritt, Tribune Co.'s chief restructuring officer; Nils Larsen, chief investment officer; Tony Hunter, publisher of the Chicago Tribune; and Eddy Hartenstein, publisher of the Los Angeles Times.
Michaels' exit apparently was accelerated by an unflattering portrait drawn of his management style in a front-page story published by The New York Times two weeks ago. The story, based on interviews with more than 20 current and former Tribune Co. employees, likened Michaels to the ringleader of a college fraternity house. The newspaper asserted that Michaels helped cultivate a culture filled with sexual innuendo, profanity, poker parties and other bawdy behavior.
Tribune Co.'s board of directors issued statements supporting Michaels in that article, but he quickly found himself under fire again last week when a top lieutenant sent an internal memo with an Internet link featuring a racy video that included a bare-breasted woman pouring booze down her chest. The executive, Lee Abrams, resigned as Tribune Co.'s chief innovation officer.
By the time he was named Tribune Co.'s CEO, Michaels already had gained a reputation for using language and engaging in conduct more befitting of the "shock jock" that he once was. Michaels and Zell said they were trying to loosen up a traditionally staid company and usher in fresh thinking at a time of upheaval in the media business. Zell remains Tribune Co.'s chairman.
While Michaels was CEO, Tribune Co.'s financial performance improved, helped by cost cutting that has become common at newspaper publishers throughout the country as they try to offset a steep downturn in advertising sales that has depleted their main source of revenue.
Tribune Co. already has projected its newspapers' revenue will continue to drop for at least two more years while its broadcasting division rebounds. The company's other major newspapers include The (Baltimore) Sun, Hartford (Conn.) Courant and the Orlando (Fla.) Sentinel.