Federal Trustee Blasts Tribune Bonus Plan

Newspaper publisher Tribune Co. won't receive approval for a $42.9 million 2010 bonus program without overcoming an objection from the U.S. Trustee at a June 16 hearing. The agent for the $1.6 billion so-called bridge loan also objects.

The 2010 bonus plan would cover 640 employees, including top management. If operating cash flow is 132 percent of target, the bonus pool would be $42.9 million, including $5.7 million for the highest executives. If targeted operating cash flow is achieved, the bonus pool will be $30.8 million, with $2.2 million for top executives.

Both the U.S. Trustee and the agent asked the bankruptcy judge not to consider approving the 2010 bonus program next week because other bonuses are engrafted into the Chapter 11 plan that's scheduled for approval at an Aug. 16 confirmation hearing. They want all bonuses considered together at the confirmation hearing.

The U.S. Trustee noted that $100 million in bonuses will have been handed out in the Tribune Chapter 11 case if the new requests are granted.

The agent reminded the judge that the bridge lenders will only recover 1.5 percent if they accept the plan. If they vote against the plan, they argue that the bonuses will violate one of the rules for cramming down a plan.

Also noting that the plan has "next-to-nothing for various classes of Tribune creditors," the U.S. says "now is not the time for yet another round of bonuses."

The plan was filed in April to implement a settlement negotiated with some creditors. It is opposed by holders of $3.6 billion in pre-bankruptcy secured debt who announced their opposition even before the settlement was formally disclosed. To read about the plan, the proposed settlement, and the parties' arguments, click here for the April 13 Bloomberg bankruptcy report.

Tribune is the second-largest newspaper publisher in the U.S. It listed $13 billion in debt for borrowed money and assets of $7.6 billion in the Chapter 11 reorganization begun in December 2008. The company owns the Chicago Tribune, Los Angeles Times, six other newspapers and 23 television stations.