By: The Associated Press and E&P Staff
A Delaware bankruptcy judge on Wednesday approved bonuses of up to $45 million for hundreds of Tribune Co. managers, including its top 10 executives.
Judge Kevin Carey overruled objections by the Washington-Baltimore Newspaper Guild and the U.S. bankruptcy trustee, saying the 2009 incentive plan covering some 720 employees was justified.
Tribune, which owns the Los Angeles Times, Chicago Tribune, The Baltimore Sun and other dailies, along with 23 TV stations, filed for bankruptcy protection in December 2008 because of dwindling advertising revenues and a crushing debt load of $13 billion. Much of that debt was amassed when real estate mogul Sam Zell took the company private in 2007.
Last year, Tribune proposed three separate employee bonus plans, arguing that they were needed to retain top managers working in a difficult environment.
The Washington-Baltimore Newspaper Guild, which represents about 230 employees of The Sun, argued that the bonuses were unwarranted. The Guild was joined in its objection by the U.S. trustee, two Baltimore-based Teamsters locals, and the Newspaper Guild of New York, which represents 29 employees at television station WPIX.
The ruling Wednesday’s clears the way for the checks worth tens of millions of dollars to be distributed next month.
In approving the incentive plan, Carey said that Tribune is operating in a troubled industry which has seen roughly a dozen large media companies seek bankruptcy protection.
“Here, the evidence demonstrates that the debtor was performing well relative to its competitors,” Carey said. “… I conclude that the relief requested is justified by the facts and circumstances of the case.”
Tribune chief financial officer Chandler Bigelow III testified in September that the bonuses were designed using operating cash flow as the key metric and a 2009 target of $212 million, less than a third of the previous year’s $789 million. By the time of the hearing, the company already had exceeded the 2009 target, with a projected year-end figure of between $350 million and $400 million.
Bigelow rejected Guild claims that the target was set too low, and Carey said Wednesday that it would not be fair “to move the goal posts” in the middle of the performance period.
Tribune’s plan to pay out as much as $45.6 million in bonuses would drain more than 10% of operating cash flow to reward top managers for a year in which cash flow fell to historic lows, attorneys for the Washington-Baltimore Newspaper Guild said in court documents filed a day before the hearing.
The Guild asked the court to block the bonuses, which Tribune has portrayed as an routine annual “management incentive program (MIP).”
But the only thing “annual” about the plan, the Guild lawyers say in documents filed Tuesday, is that it is paid every year.
“There has never been an MIP like this one: an unprecedented payout of millions of dollars to a smaller number of executives in a year in which employee salaries were frozen to ‘share the sacrifice’ and there was an historic low in operating cash flow,” the union said.
Over the past decade, MIP payouts never amounted to more than 3.3% of operating cash flow, the union said. It said the 2008 payout of $13.4 million represented 1.5% of operating cash flow.
By contrast, the proposed 2009 payout amounts to 10.75% of operating cash flow, which the union calls an “extraordinary” level.