No losses from ESOP

Well, at least Tribune Co. employees won't be losing anything from the company's employee ownership stock plan (we think). The initial contribution was expected to be made in the first quarter, so balances are still at zero. Other retirement benefits appear to be largely unaffected by the Chapter 11 filing, though it's still not known how much is left in the company's pension plans. As of the end of 2007, there were surplus assets of more than $500 million, but obviously a bunch of that was lost in the last year. From the WSJ:

Employees can still contribute to their 401(k) plans, although the company stopped contributing to their accounts this year. Retirees receiving pensions will be unaffected, and employees are still entitled to collect whatever pensions they have accumulated. The only circumstance in which this wouldn't happen would be if the pension plan were turned over to the Pension Benefit Guaranty Corp. in bankruptcy; if the plan were severely underfunded, some highly compensated people could lose some of their pension. The maximum the PBGC will pay for pension plans terminating in 2009 is $54,000 a year for those who retire at age 65.

Just so we're clear, filing for bankruptcy protection is not the same as being bankrupt. The idea behind a Chapter 11 filing (named for the section of the bankruptcy code) is to allow a faltering company the chance to reorganize without being burdened by creditors. Essentially, it's the business equivalent of a timeout (legally it's called an automatic stay). That's the good news. The bad news is that the company is now under the control of a bankruptcy judge, who must approve most any significant aspect of the company operations. That's why, for instance, the LAT is freezing deferred compensation payments to former employees. Everything now goes to the judge.

A company filing for Chapter 11 protection continues operating normally (well sort of). That's why the LAT and other Tribune properties are still publishing. The next major step is for Tribune to file a plan of reorganization - basically a roadmap on how the company intends to get out of its financial troubles. That should happen within the next four to six months, perhaps sooner. Creditors may also offer their own reorganization ideas, but only after a certain period of time (the idea is for the company to make the initial proposal). Friends, this could be a very long process – most likely a year or more. Of course, with the economy expected to be in recession for much of next year, Zell might not be in any hurry. The U.S. Courts Web site has a pretty good review of the Chapter 11 process. Also, here's the Tribune Q&A that was posted earlier in the week.