Thread: Tribune Co. proposes severance package for top executives

Tribune proposes severance package for top executives

The Chicago company, which owns the Los Angeles Times, did not put a price tag on the proposal it has submitted in bankruptcy proceedings.

By Michael Oneal, Chicago Tribune

July 30, 2010|9:01 a.m.

Tribune Co. proposed paying its top 43 executives a severance package of cash and benefits if they are asked by a new board to leave the company after the media conglomerate emerges from bankruptcy.

The Chicago company, whose properties include the Los Angeles Times, did not put a price tag on the package but said it amounts to 2.5 times salary and bonus for Chief Executive Randy Michaels and 2.25 times salary and bonus for Chief Operating Officer Gerry Spector. Both would be entitled to 24 months of the company's group health benefits.

Nine other top executives, including Tony Hunter, the publisher of the Chicago Tribune, and Eddy Hartenstein, publisher of the Los Angeles Times, would get 1.75 times salary and bonus plus 24 months of benefits. A list of 32 others would get 1.5 times salary and 18 months of benefits.

Tribune Co. filed the plan late Thursday as part of a supplement to its plan of reorganization. The severance agreement would have to pass muster with the large banks and hedge funds that will end up controlling the company. As part of the reorganization plan, the severance arrangement will have to survive whatever opposition might emerge during the plan confirmation process scheduled for late August.

A host of creditor groups on all sides of the case have already raised concerns about current Tribune Co. management's compensation scheme. Since the Chapter 11 case began in December 2008, U.S. Bankruptcy Judge Kevin Carey has approved $57.3 million in bonuses for more than 600 top and middle managers at Tribune Co., including incentive payments of $42.1 million for 2009 performance.

Last week, the company filed a 2010 management incentive plan that made the incentive targets more challenging but could potentially add an additional $42.9 million in payments from the company.

The plan document, which does not provide dollar amounts for individual salaries or bonuses or provide a total cost of the severance plan, said the agreement would kick in for any of the 43 employees who are terminated within what it defined as the "Protection Period," or 18 months past the effective date of the reorganization plan. If the executive is let go for cause or because he or she is unable to do his or her duties for more than 180 days, the severance agreement does not apply.

Tribune Co. also proposes in the plan to compensate executives with shares of stock in the reorganized company drawn from a pool of equity set aside for such incentive plans. The company originally proposed putting aside 7.5% of the new equity for the program. But after opposition from future owners such as hedge fund Angelo, Gordon & Co. and JPMorgan Chase, Tribune Co. decided to leave the architecture of the program to a reconstituted board that would be chosen by a large group of financial institutions that is slated to own more than 92% of the company under the reorganization plan.

In the plan supplement, Tribune Co. indicated that it anticipated that the company's current board and management would be retained until the restructuring plan could be confirmed and put into place. The new ownership would have the right to pick the company's longer-term leadership. It is anticipated that the board, at least, will be remade, including, sources say, the departure of Tribune Co. Chairman Sam Zell.

Tribune Co.'s reorganization is currently up for vote with ballots due Aug. 6, although at a hearing in U.S. Bankruptcy Court in Delaware on Thursday, Carey indicated that he might push that date out a few days so that creditors would have a chance to digest an examiner's report in the case evaluating charges that the company's 2007 leveraged buyout, led by Zell, may have been a case of fraudulent conveyance, meaning it rendered the company insolvent from the day it closed.

Under law, Tribune Co.'s exclusive right to propose a plan of reorganization runs out Aug. 9, meaning that others could propose competing plans after that date. Carey, however, said Thursday that he would do his best to make sure Tribune Co.'s confirmation hearings proceed as planned starting Aug. 30.

mdoneal@tribune.com

http://www.latimes.com/business/la-fi-t ... 4760.story

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