Wednesday, December 10, 2008

Crawling Out From Under The Tribune Wreckage Won't Be Easy

Zell Looks To Make Those Who Left Before Chapter 11 Suffer The Most

Out of all the stories I've read about the Tribune bankruptcy, the one that ran in The New York Times yesterday is perhaps the most scary.

What struck me was this passage;

A note on an internal Tribune Company Web site said, “All ongoing severance payments, deferred compensation and other payments to former employees have been discontinued and will be the subject of later proceedings before the court.” That made it apparent that employees who recently were laid off or took buyouts would join the long list of unsecured creditors.
James Gerstenzang (above), a reporter who left The Los Angeles Times’s bureau in Washington last month, said he was trying to figure out whether he was one of those people. He said he had just sent in the last paperwork to approve his expected buyout payment — 49 weeks of pay, after more than 24 years.

So, what we have here are hundreds of people -- maybe thousands -- who now have, if Tribune stands pat, the equivalent of the hole in the middle of a doughnut.
I doubt that'll be the end result, but Gerstenzang and his colleagues shouldn't expect to get what they're entitled to. That's not why companies go into Chapter 11 in the first place.
I had a first-hand window into how this works when I was at UPI in 1985, when it filed for bankruptcy. I was owed several hundred dollars from when I was a stringer for them the year before.
One thing UPI didn't like to do was pay its bills, although it turned out there was a reason for that -- it couldn't.
When the dust settled about a year later, I received about 45 cents on the dollar for what I was owed. I cashed that check in a hurry.
Given that Tribune's perilous fiscal state of affairs will only worsen next year, 45 cents would be a great deal in this climate. It's not what distinguished reporters like Gerstenzang deserve, but it does beat the hole in the middle of the doughnut.

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