Judge approves Tribune bankruptcy plan

The Tribune Tower.

After three years, the Tribune bankruptcy saga is finally coming to end – but at a price.

A federal judge approved the bankruptcy plan created by banks and creditors on Friday. Those entities – Angelo, Gordon, and Co., JP Morgan Chase, and Oaktree Capital Management – now take control of the media company, which means for the first time in its 165-year history, the Tribune Co. will not be run from Chicago.

Sam Zell  bought out Tribune in 2007 in a $8.2 billion leveraged buyout. But Tribune went into bankruptcy a year later after it was crushed with debt totaling $13 billion. Since Zell took over the Tribune, the company closed its syndication arm (Tribune Entertainment), laid off thousands of employees, and made numerous and embarrassing management gaffes, with the most recent one involving a scandal featuring TribLocal outsourcing content to a company who used fake bylines and also fabricated and plagiarized stories.

The future of the company’s 22 television stations, WGN Radio, the Chicago Tribune and three other papers, and stakes in the Food Network and CareerBuilder.com are still up in the air. The cross-ownership rules created by the FCC in 1975 prohibit the ownership on television and radio stations and a newspaper in a single market, unless grandfathered in (which was the case with Tribune, allowing them to hold on to their properties), or grant waivers, which happened when Tribune bought The Los Angeles Times, even though they owned KTLA in the same market.

The FCC could refuse to grant waivers to Tribune, meaning the creditors could be forced to break up the company and sell it off, piece by piece. But even if the FCC doesn’t intervene, the new regime at Tribune may break it up anyway, since the value of television stations are far higher than the newspapers.

This is one of the reasons News Corporation recently announced it was splitting its entity into two with one company consisting of publishing and the other consisting of entertainment.

Also looking on with some interest is The CW, whose stations are owned by Tribune in six of the top ten markets, including Chicago and fourteen CW affiliates overall. With rock-bottom ratings (several of its prime-time shows have recently flirted with the hash-mark kiss of death), the new owners could drop the CW affiliation from those Tribune stations and make money airing syndicated programming in prime-time – something that has been successful (to a certain degree) with My Network TV. After all, these are creditors and banks we’re dealing with – they’re unlikely to continue financing a network going nowhere in the ratings, unless they sell the station group to someone willing to invest in first-run network programming.

During the Zell era, Tribune’s San Diego station (KSWB-TV) defected from CW to Fox, raising questions about how solid Tribune’s relationship was with the struggling network.

In Chicago, Tribune currently owns WGN-TV, WGN Radio, local news channel CLTV, and the Chicago Tribune.