(Reuters) - Tribune Co and its creditors are in early negotiations for a reorganization plan in bankruptcy court that would likely transfer control of the media conglomerate from billionaire Sam Zell to a group of large banks and investors, the Chicago Tribune said, citing sources.
The plan centers on a debt-for-equity swap that would likely give the lenders, who hold $8.6 billion in senior debt, a large majority ownership stake in the reorganized company, the paper said.
Under the plan, a $90 million warrant, which Zell negotiated as part of his $8.2 billion deal to take the company private in 2007, would be wiped out, a source with knowledge of the situation and plan told the paper.
The warrant gives Zell the right to buy about 40 percent of the company for $500 million and is the basis of his control over Tribune Co, according to the paper
Tribune Co's employees own 100 percent of the company's equity through a tax-advantaged corporate structure known as an S-Corp ESOP, the paper said, adding that a tangle of S-Corp rules may make it difficult to give the senior lenders equity and maintain the S-Corp structure.
Zell and his top managers "remain actively engaged and committed to this company," Tribune Co said in a statement to the paper. "The restructuring is still in progress, and it is premature to speculate about the final ownership structure."
Tribune Co could not be immediately reached for comment by Reuters. Tribune Co, which owns the Chicago Tribune and Los Angeles Times newspapers, filed for bankruptcy in December due to its heavy debt load and the weak U.S. publishing sector.
(Reporting by Ajay Kamalakaran in Bangalore; Editing by Muralikumar Anantharaman)
Source: Reuters
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