Posted by Bud on May 28, 2010 at 09:20:38:
Plan to supplement $42.1 million in court-approved bonuses runs into opposition
By Michael Oneal, Tribune reporter
8:06 p.m. CDT, May 25, 2010
Tribune Co. plans to pay 35 top executives an additional $14.9 million in 2009 bonuses, despite pointed opposition from several key constituents in the company's nearly 18-month-old bankruptcy case.
In a court filing, Tribune Co. said the bonuses are rewards for the executives steering the company through bankruptcy court while generating total operating cash flow of $494 million in 2009.
The payments, devised as two plans, would supplement $42.1 million in incentive bonuses the court allowed Tribune Co. to pay in February to about 670 managers, including the senior executive group.
The new plans also anticipate paying $1.3 million in discretionary bonuses to a group of 50 managers deemed to have made valuable contributions to the restructuring. None of those awards can exceed $65,000, the document said.
The total of $58.3 million in 2009 bonuses represents $5 million less than the maximum the company could pay under the proposed plans, which are tied to management exceeding performance targets. The Chicago-based company said several operating executives failed to meet their targets or exceed them by enough to merit the highest rewards.
Tribune Co. paid out incentive bonuses of $15.3 million in 2009 based on 2008 performance.
Management's push to pay such large bonuses, despite Tribune Co.'s bankruptcy and declining revenue, has stirred controversy from the start. An incentive payment plan filed in July 2009 generated a storm of protest from the U.S. Bankruptcy Trustee and the company's unions, who argued that management's performance targets were set too low, allowing Tribune Co. to beat them easily.
A broader range of creditors has complained about the most recent bonus requests and has raised questions about a future plan under which the company had said it might set aside as much as 7.5 percent of the company's equity for ongoing management incentive rewards.
Even two key creditor allies that otherwise support the company's restructuring plan, JPMorgan Chase and Angelo, Gordon & Co., have taken issue with compensation plans and the size of the bonuses a few top executives are slated to receive.
Tribune said in a statement Tuesday, "We are working to address any issues creditors may have and are confident that these performance-based compensation plans will get approved as part of our plan of restructuring."
Sources said Tribune has reworked language surrounding the future equity incentive plan to meet creditor demands. The initial proposal has been trimmed to a 5 percent equity pool for incentive programs. Senior creditors, who will end up owning the company under the restructuring plan, also demanded that a board of directors of their choosing, not the current one, decide how the equity plan works and how much stock management will get upon Tribune Co.'s emergence from bankruptcy.
Nevertheless, one source close to the situation said Tribune Co. will likely face continued opposition over the compensation issues, adding to a mix of problems that several participants, including U.S. Bankruptcy Judge Kevin Carey, have predicted will make scheduled confirmation hearings in August contentious and difficult.
Tribune Co., which owns the Chicago Tribune, Los Angeles Times and other media assets, faces stiff opposition from a group of senior creditors led by hedge fund Oaktree Capital Management, as well as several subordinated creditor groups.
To appease them, the company has revised the disclosure statement that must accompany the restructuring plan to provide more information about potential legal claims involving the company's 2007 leveraged buyout, and it made a key change in voting procedures that had incited protest.
But lawyers continue to wrangle about the wording in a position statement issued by a group of bridge lenders destined to get a tiny payout under the proposed settlement. And Oaktree, among others, shows no sign of backing off its opposition.
Objections to the newest version of the disclosure statement are due Wednesday and a hearing is scheduled to take up the document on Friday. Assuming it passes, Tribune Co. would have 60 days to solicit votes of support for the plan, with the hope of having it confirmed during hearings scheduled for the week of Aug. 16.