KPLU Local News
(2008-12-09)
BALTIMORE, MD
(wypr) -
Employees of the Baltimore Sun have reason to worry about their jobs this morning. The Tribune Company which owns the Sun, filed for Chapter 11 Bankruptcy reorganization yesterday, because the company is 13-billion dollars in debt. WYPR's Art Buist reports on what this means for the Sun, and what will happen next.A year ago, when Chicago real estate mogul Sam Zell put together a highly leveraged plan to use about 500-million of his own money to buy the Tribune Company, a lot of experts thought the plan wouldn't work. They were right.
Lawyers from the Tribune Company showed up at the Bankruptcy Court in Delaware Monday to file for reorganization under Chapter 11 of the bankruptcy law. The case will be heard in Delaware, because the Tribune Company is incorporated in that state. Almost immediately, there was a hotline to answer questions.
"Thank you for calling the Tribune Company's Chapter 11 information line. While Tribune has filled for Chapter 11 protection with the U.S. Bankruptcy court in Delaware the company remains in full operation. Tribune will continue to publish its newspapers, run its stations and run its other business units."
In addition to the Sun, the Tribune Company owns eight other English language dailies, three Spanish newspapers, 23 television stations and assorted other media outlets. The company also owns the Chicago Cubs, which was not included in the bankruptcy filing. In the short-run, Sun employees don't need to worry they won't get paid.
"As part of Tribune's first day motions, we have asked the court to grant authority for the company to continue paying wages to employees as well as health benefits."
Thomas Renda has practiced bankruptcy law with the Baltimore law firm, Miles and Stockbridge for nearly a quarter-century. He tells WYPR it's pretty routine to file motions to pay employees.
The purpose is to keep the company alive in the first few weeks of the case. And, to do that they need to pay their employees, because if the employees are not paid they typically tend to walk."
Miles and Stockbridge is not involved with the Tribune bankruptcy. Attorney Renda said employees and retirees probably do not have to worry a lot about pensions.
"Their pension plans are protected by the Pension Benefits Guarantee Corporation, so, if for some reason, the Sun was not able to honor those, then there would be\some protection in terms of the liabilities by the PBGC, and they would get the vast majority of what had been promised to them."
401-K programs are also protected as being held "in trust" for the employees. Unlike Chapter 7, where all the assets are liquidated to pay creditors, in Chapter 11, the company continues to operate, with the same management, but with protection from its creditors. The United States Bankruptcy Trustee appoints a representative Creditor's Committee, which negotiates with the company to come up with a plan to pay creditors -- at least some of their money -- and reorganize the business. Once they have come up with a plan, it gets submitted to all the creditors for approval.
"The reorganization plan is submitted to all the creditors for votes, and there have to be certain hurdles met in terms of the number of creditors and the amount of the debt. Typically that criteria is more than 50-percent of number of creditors in a class and more than 66-percent of the amount of the debt."
The plan could include selling assets, such as the Sun, and write downs of some of the large loans. Unlike Chapter 7 the trustee's role is limited. The trustee is not likely to force decisions, unless the Committee quests the Trustee's involvement. It may take many months to come up with a plan. Once the plan is approved, the company is technically out of Chapter 11, even though it may take many years to actually implement the plan and settle things with creditors.
But if a plan can't be worked-out, or implemented, the case could be changed to a Chapter 7, and everything would be liquidated.
I'm Art Buist, reporting in Baltimore, for 88-1 WYPR.
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