Nation & World

Former Tribune execs agree to pay $200 million

Lawsuit said buyout was doomed to fail

Los Angeles Times/TNS

The Tribune Co., predecessor company to Tribune Media, filed for bankruptcy in December 2008, one year after Chicago billionaire Zell took the company private.
Los Angeles Times/TNS The Tribune Co., predecessor company to Tribune Media, filed for bankruptcy in December 2008, one year after Chicago billionaire Zell took the company private.

CHICAGO — More than a decade after Tribune Co. went private in a leveraged buyout that saddled the company with $13 billion in debt and led to its bankruptcy, Sam Zell and dozens of former executives have agreed to pay $200 million to settle a lawsuit brought by unsecured creditors.

The settlement agreement, awaiting approval in a Delaware federal bankruptcy court, would close the book for the corporate directors and officers behind what Zell himself called the “deal from hell” — an ill-fated transaction that the plaintiffs alleged doomed the company to insolvency from the outset.

But thousands of ordinary shareholders still may be forced to give back some of the proceeds from the 2007 buyout — if the litigation trust representing the unsecured creditors prevails in still-unsettled actions.

During court-ordered mediation in March, more than 50 former Tribune directors and senior executives agreed to settle with the litigation trust for $200 million, according to a motion filed May 31.

A court approval hearing is scheduled for July 11.

The $200 million is “significantly in excess” of available liability insurance, according to the settlement agreement. That means the settlement defendants will have to make up the difference.

Tribune Co. — the predecessor company to Tribune Media — filed for bankruptcy in December 2008, one year after Chicago billionaire Zell took the company private in a heavily leveraged $8.2 billion deal.

At the time, Zell blamed a “perfect storm” of industry and economic forces — the Great Recession.

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But the bankruptcy case turned on charges leveled by junior creditors that the debt burden was unsustainable.

Sources said appeals could take several more years to resolve.

Tribune Media spun off the Chicago Tribune and other major newspapers into Tribune Publishing in 2014, retaining broadcast, real estate and other assets.

In December, Nexstar Media Group agreed to buy Tribune Media for about $4.1 billion, pending approval from shareholders and federal regulators.

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