Illinois Public Media News
A two-week hearing begins Monday to determine the fate of Tribune Co. more than two years after an ill-advised $8.2 billion buyout drove one of the oldest U.S. media companies into bankruptcy protection.
The proceedings follow four years of tumult and intrigue at Tribune Co. The company has been through the disgrace of a bankruptcy case that has lasted far longer than planned, a CEO departure triggered by complaints about management's raunchiness and the whiff of a financial scandal fanned by a court-appointed examiner's conclusion that parts of the 2007 buyout had bordered on fraud.
The hearing in U.S. Bankruptcy Court in Wilmington, Del., will affect the ownership of the Los Angeles Times, the Chicago Tribune, The Sun of Baltimore, other daily newspapers and 23 television stations. The TV stations include Chicago-based WGN, which reaches more than 70 million homes nationwide, mostly through cable and satellite systems.
The hearing edges Tribune Co. closer toward shedding most of the roughly $13 billion that it carried into bankruptcy protection. If it can unload the debt, the company believes it can make money while it tries to adapt to a marketing shift to the Internet.
Judge Kevin Carey is being asked to choose between two competing reorganization plans. The plans differ in their appraisals of Tribune Co.'s current value and their limitations on which participants in the troublesome buyout can be sued for saddling the company with too much debt.
Either way, the outcome is likely to leave Tribune Co. controlled by its creditors. The new owners are expected to replace the patchwork management team that has been running the Chicago-based company since the previous CEO, Randy Michaels, resigned in October amid complaints about risque conduct.
Tribune Co., founded in 1847, filed for bankruptcy protection in December 2008, making it the first major U.S. newspaper publisher to do so during the Great Recession. The deep downturn magnified the challenges facing newspaper publishers as readers and advertisers moved from print to digital alternatives.
The slump prompted more than a dozen other newspaper publishers to follow Tribune Co. into bankruptcy protection. Like Tribune Co., several of them were saddled with billions of debt taken on during better times. Most of them have emerged from bankruptcy protection already.
The complex 2007 buyout engineered by real estate mogul Sam Zell complicated Tribune Co.'s effort to return to normal business operations. The allegations of financial conduct made many creditors less inclined to make concessions during negotiations on a reorganization plan. The independent examiner's report last summer prompted the company to back off one proposal.
This month's hearing makes it more likely that Tribune Co. will finally emerge from bankruptcy court this year. The legal fallout could last for years, however. Both plans envision creditors pursuing lawsuits in an attempt to recover more of their losses, and there could be an appeal of Carey's decision in the case.
The stakes riding on the resolution of the convoluted saga are expected to attract a crowd. Carey is setting up a video feed in an overflow room to accommodate up to 100 more people beyond the 175 spectators that can cram into his courtroom. The judge also is clearing space in the courtroom for more than 2,000 exhibits expected to be submitted during the hearing.
"It will take some time and involve some tedium," Carey said during a housekeeping hearing last week.
The hearings also could shed more light on Tribune Co.'s operations and the behind-the-scenes maneuvering that led to the Zell buyout, which took the company private and turned employees into part-owners.
Reams of documents in the case have been kept under wraps to protect what has been described as confidential business information. Carey so far has rejected requests to unseal the documents, but he has warned that some of the information could come out during the hearing because he doesn't plan to close the courtroom.
Tribune Co. favors a plan that would turn over ownership to the company's major creditors, including some that had helped line up the ruinous financing, which already has triggered lawsuits. It would shield the lenders involved in the buyout from lawsuits after the company emerges from Chapter 11. Opponents of the plan contend it would also block attempts to sue former Tribune Co. shareholders who received $4.3 billion in the buyout's first phase.
This proposal has the backing of Tribune's Co.'s proposed new owners - a group led by banker JPMorgan Chase & Co., distressed debt specialist Angelo, Gordon & Co. and hedge fund Oaktree Capital Management. It's also supported by Tribune Co.'s committee for unsecured creditors.
A group of creditors that owns Tribune Co. debt issued before the Zell buyout has proposed an alternative plan primarily because they want fewer limits on which parties can be sued for alleged fraud. The plan also contends these note holders, led by hedge fund Aurelius Capital, are entitled to be paid bankruptcy claims totaling $1.2 billion instead of $761 million offered in the proposal backed by Tribune Co.
Zell, still Tribune Co.'s chairman, has filed objections to both plans because he and a business arm, Equity Group Investments, would remain exposed to lawsuits alleging fraud.
The competing reorganization plans also came up with dramatically different estimates on Tribune Co.'s business value. The company-backed plan pegs it at $6.7 billion, compared with $8.3 billion in the Aurelius-led proposal.
Tribune Co. has been gradually recovering from the recession, primarily because of an industry-wide revival in television advertising. The company's revenue last year totaled $3.1 billion, 2 percent below 2009, based on court documents.
But the company still gets more of its revenue from newspapers and other publishing sources. Tribune Co. has predicted its revenue this year will decline 4 percent, dip another 2 percent in 2012 and slip 3 percent in 2013.
Those forecasts assume the new owners won't break the company apart by selling some of the newspapers and TV stations.
Union groups plan to continue rallying at the Indiana Statehouse to protest several bills supported by Republicans.
The Indiana AFL-CIO says it expects thousands to attend a "We Are Indiana" rally Thursday from 11 a.m. to 2 p.m. on the west side of the Statehouse. Tuesday, unions are planned to mourn the "death of the middle class" with a New Orleans-style funeral procession.
Members of the AFL-CIO and other unions have been gathering at the Statehouse to protest what they consider anti-union legislation backed by Republicans who control the House and Senate. House Democrats are boycotting that chamber in an effort to derail some of the proposals.
Democrats say they won't come back until Republicans negotiate, but Republican House leaders refuse, saying they won't be bullied into dropping bills.
About 80 Champaign employees, most of them in public works, are being asked to begin scheduling furlough days to reduce the impact of salary increases that went into effect last July.
City human resources director Chris Bezruki said the AFSCME union workers are being asked to take six furlough days between now and the end of August. He said the salaries of non-union city employees were frozen this fiscal year, but AFSCME received a 3-and a quarter percent raises. The union has responded to the furlough mandate by filing an unfair labor practice charge against the city of Champaign, alleging leaders negotiated in bad faith. Their complaint will go before the Illinois Labor Relations Board.
City negotiations with AFSCME Council 31 started in December. Bezruki said the two sides started to discuss the impact of furlough days.
"How many we need to take, and how we're going to do that?" Bezruki said. "How we're going to schedule it? What employee input should there be? Should they schedule a furlough day next to a holiday if they want, or things like that? They refused to make a counterproposal at all, and so we had declare an impasse just last month. And so now we're proceeding with implementing this process."
Michael Wilmore, a Staff Representative with the AFSCME union, said the city chose to ignore a number of other cost saving options, including a pay freeze, removing the cap on overtime pay to comp time, and starting a four 10-hour day schedule for public works. He contends the moves could have saved more than $200,000 additional dollars.
Bezruki said the complaint filed by AFSCME means the Labor Relations Board will request information on negotiations between the two sides, the proposals that were exchanged, and whether a hearing will take place. He said that process can be drawn out as long as six months.
Students, instructors, and graduates of the University of Illinois' Institute of Aviation say administrators want to close a valuable program at a time when it's needed most.
About 80 of them Thursday discussed an industry that stands to lose about 37,000 pilots in the U.S. alone over the next 10 years. U of I Graduate Nathan Butcher is now a Delta pilot. He said there's a decline in training overall, and many pilots are nearing their mandatory retirement age. Butcher said administrators have a very narrow view of the Institute, which is turning out more than pilots.
"The Institute of Aviation is a long standing center for excellence in the field of professional pilot training, aviation research, and aviation safety advancements," he said. "Unfortunately, the university's administration defines the Institute of Aviation's role as being very technical and only worth of trade school status. Nothing could be further from the truth."
Willard Airport Tower Air Traffic Controller Kevin Gnagey said two thirds of his workforce is nearing retirement age, and that the Institute generates 85% of the traffic they direct at Willard. Gnagey contends the U of I is also throwing away the chance for future research on airport grounds.
"I would also be so bold as to assert that losing the Institute of Aviation could pose a large loss to the University of Illinois," he said. "This loss may not be immediately evident, but as the FAA is investing billions of dollars into research and development in new technology for the next generation of the national airspace system, opportunities would be lost."
Instructor and U of I graduate Joseph McElwee said while no decision has been made, he says administrators are trying to make closing the institute easier by moving remaining faculty to other academic units, and denying Fall 2011 admission to new applicants.
"They say that no decision has been made, so we don't have to bargain with your VAP's (Vistiing Academic Professionals)," McElwee said. "But at the same time, if you think about this, it's just an academic institution. And so the backbone of this is the students. And if we don't have students, there's no one to teach."
U of I spokeswoman Robin Kaler said the recommendation to close the facility came after evaluating competing interests of students, faculty, and the public, and determining that closing the Institute and discontinuing degree programs were in the best interests of the Urbana campus. She also cites declining enrollment at the Institute in the past decade, noting it had 176 applicants in 2002, admitting 119, and 65 freshman enrolled. In 2010, the Institute had 112 applicants, admitting 65 and 34 enrolled.
A hearing on the Institute's future will be held Tuesday before Urbana campus Senate. The plan must also go before the U of I's Board of Trustees and the State Board of Higher Education.
Republicans in the U.S, House of Representatives say if the federal government shuts down over a budget impasse, it won't be their fault.
15th district congressman Tim Johnson returned to Champaign-Urbana Thursday with an additional two weeks remaining until the federal government would have to shut down without a spending plan in place for the rest of the fiscal year.
But Johnson said Democrats in the Senate and White House need to make the next move.
"We've done our job," Johnson told reporters at Willard Airport. "We'll see what they come back with. But I don't want to have this mantra that we faced from 1995 where (Democrats said) 'It's the Republicans who are shutting down government.' It's not the Republicans shutting down government. We have acted. They didn't act. They controlled the whole process for upwards of half the fiscal year and did nothing."
On Thursday the Obama administration proposed another $6.5 billion in cuts, but Johnson said that pales in comparison to the $100 billion cut the GOP has promised, and he doesn't see the spirit of compromise in the President's offer.
Johnson also defended a provision in the Republicans' plan that zeroes out funding for the Corporation for Public Broadcasting. Johnson - who has been a member of the House Public Broadcasting Caucus - said the budget had to be passed, even with the severe cut.
"You can't fail to act on the budget simply because there are certain items within the budget that you'd rather see reenacted," he said. "Certainly that's of concern; there are a number of areas of concern to me. But the overwhelming concern is that we're in debt, we're broke and we have to do something about it.
The stalemate between Democratic and Republican state lawmakers in Indiana nears the end of its second week.
Indiana House Democrats are still held up at the Comfort Suites in Urbana.
They fled their state capitol to avoid a quorum and possible arrest by Indiana State Police.
House Minority Speaker Pat Bauer actually returned to Indianapolis for a little while Wednesday morning to meet with GOP leadership including Majority Speaker Brian Bosma.
Bauer said they refuse to drop bills aimed at diminishing the impact of organized labor, gutting collective bargaining for teachers and providing taxpayer money as vouchers to allow parents to send their children to private schools.
"This is a process where we are trying to deradicalize the majority who are trying to cut the wages of thousands of workers in Indiana," Bauer said. "When they agree that they are not going to do that or help minimize the impact of that in some way, we'll come back."
Bauer returned to Urbana, about two hours west of Indianapolis, where he continued to caucus with about 30 Democrats staying at the Comfort Inn in Urbana.
Several Northwest Indiana state Representatives are among the group, including Dan Stevenson of Highland, Vernon Smith of Gary, Mara Candelaria Reardon of Munster and Linda Lawton of Hammond.
House Republicans will try again this morning the restart the legislative session in Indianapolis where protestors continue to show up.
(Photo by Michael Puente/IPR)
Public universities in Illinois are letting state lawmakers know how government funding cuts have impacted them.
The schools are hoping to avoid further cuts in the next state budget. University of Illinois President Michael Hogan said he put in a request for more money from the state. Now he said he is just hoping his funding level stays the same without getting docked by legislators.
"The governor has come in asking for less," he said.
Hogan said keeping high-profile faculty at the university is hard when he can't offer competitive salaries. He said the school remains under a hiring freeze. Meanwhile, Southern Illinois University's president Glenn Poshard said he's having the same problems. He said the money issues at his school have been exacerbated by late payments from the state.
"If this the state's not going to help us," Poshard exclaimed. "I mean had we not had the income fund monies that we have from the tuition increases, we couldn't make payroll."
But lawmakers say universities, just like every other state benefactor, must tighten their belts to survive the state's current budget crisis.
University of Illinois President Michael Hogan's $620,000 annual salary continues to vex state legislators.
During a Senate hearing, Hogan told Illinois lawmakers that a continued erosion of state support and the resulting lack of raises for the schools' employees have caused top faculty to leave. Hogan said making the U of I's salaries more competitive is a top goal. Republican Senator Chris Lauzen of Aurora questioned how Hogan can talk with school staff about raises given his salary.
"How will you possibly speak credibly about shared sacrifice with that background?" Lauzen asked.
Other Senators have also called Hogan's paycheck excessive, but Hogan said he will not apologize for it.
"This is the price of doing business at a major, top ten public university, and to stay competitive," Hogan said. "The arrangements I have are virtually no different than any other Big Ten president."
Hogan said he did not take a pay hike when he stepped down as University of Connecticut's President to sign on with the U of I last summer.
(With additional reporting from Indiana Public Broadcasting's Brandon Smith and The Associated Press)
House Minority Leader Pat Bauer returned to Indianapolis Wednesday and met with House Speaker Brian Bosma for nearly an hour, but their talks ended with no agreement on ending the week-long Statehouse standoff.
Bauer had two other House Democrats with him in the meeting, which also was attended by four other majority Republicans. While no resolution was reached at the meeting, Bauer said the Democrats are a step or two closer to returning.
"We're going to continue to try to see if they'll remove some of the anti-worker bills and really this voucher bill," Bauer said.
Most House Democrats have been staying in Urbana, Ill., since last Tuesday, when they began boycotting the House to derail labor and education bills they're against by denying the House the quorum needed to conduct business. The boycott already killed a "right-to-work'' bill that unions opposed. Bosma said he didn't really hear anything in the meeting he didn't already know. Discussions on the voucher bill included talk of compromise on capping the number of students in the program and lowering the income level to be eligible.
"Their list of issues hasn't really changed, and our response hasn't really changed," Bosma said. "Although some middle ground on a couple of the issues was at least explored."
Meanwhile, a member of the Indiana Senate says he's optimistic despite the rhetoric from the House Minority Leader following his meeting with Bosma.
Democrat State Senator Greg Taylor of Indianapolis said it is always positive when people talk face to face, but he said there will need to further room for compromise.
"I think there's going to have to be some give and take on both sides," Taylor said. "People people don't recognize these bills just because they pass the house. They still have to come over to the senate. I'm sure we'll be watching what's going on in the house as well as what we're going to do in the senate. There's still a long way to go."
Taylor was in Urbana Wednesday to check on the progress of caucus meetings among House Democrats. He said House Speaker Bosma has put himself into a position where he'll have to prove to his caucus that he's willing to talk.
But House Democrat Craig Fry of Mishawaka wasn't as optimistic, saying Bosma cannot be trusted.
"Even if he makes a deal, even if it's signed in blood, it doesn't mean anything," Fry said. "He's reneged on almost every deal he's ever made."
Fry maintains that the 30 plus Democrats will remain in Urbana as long as they need to be. He said it is necessary, given the Republican's radical agenda. The Democratic Party is paying for hotel rooms, but food and other expenses are out of their own pocket.
The leader of the boycotting Indiana House Democrats and the Republican House Speaker are talking in a meeting that may signal improving relations surrounding a weeklong Statehouse standoff.
House Minority Leader Patrick Bauer drove from Illinois to Indianapolis to meet with House Speaker Brian Bosma in Bosma's Statehouse office Wednesday. Most House Democrats have been staying in Urbana, Ill., since last Tuesday when they began boycotting the House to derail labor and education bills they oppose by denying the House the quorum it needs to conduct business.
The meeting is a step toward a possible resolution. But it's unclear exactly what might end the impasse. Bauer says he wants to negotiate, but Bosma says he won't cut a back room deal or take GOP proposals off the table.
Bauer has repeatedly said he wants to negotiate on GOP-proposals that Democrats consider an assault on the middle class. And Bosma has repeatedly said he'll talk to Bauer, but won't negotiate a back room deal or agree to take GOP proposals off the table.
Republicans are already planning changes to a private school voucher bill that Democrats oppose. The bill would use taxpayer money to help parents send their children to private schools. Bosma said the bill needs to be changed to get enough support from his own caucus to pass, and Republicans will introduce an amendment limiting the number of students who can participate in the program and adding more restrictive income level requirements. Bauer said Tuesday that those changes were a good step forward.
The Democrats' boycott has already killed a "right-to-work" bill that would have prohibited union membership from being a condition of employment. Republicans say they won't try to resurrect that proposal this year. Bosma says he will not allow the boycott to kill other bills and plans to extend legislative deadlines to keep the other proposals on the House calendar alive as long as necessary.
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