Tribune tries to stay intact

About a month into the Chapter 11 filing, the game plan is to restructure all that debt, hold onto the LAT, Chicago Tribune and other big assets, and maintain the complicated employee-ownership structure. This last part could be a challenge, reports the Chicago Tribune. The employee stock ownership plan was to be the centerpiece of Sam Zell's strategy to take over Tribune Co. because it provided a way for the company to sidestep tax liabilities.

The trouble with this plan, tax experts said, is that reworking Tribune Co.'s financing could be hampered by restrictive tax rules that govern S-Corp ESOPs, corporate structures built around an employee stock ownership plan. Several creditor representatives said last week that they might support keeping the current structure intact but said making a deal succeed in that framework will be difficult.

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Tribune Co. and its advisers are focused on building a case for how much the company is worth and how much cash flow it can generate in the future. That analysis will lead to a calculation of how much debt the company can support going forward, very likely a number significantly lower than the company carries today. Once that is done, the company will have to create a plan to rework the capital structure in a way that lowers the debt to sustainable levels but gives creditors enough in return that they agree to move forward without a fight.