Bloomberg News

DirecTV Asks Who Makes Decisions at Tribune as Blackouts Extend

April 03, 2012

DirecTV (DTV:US), the largest U.S. satellite- TV company, still doesn’t know whether it should negotiate with Tribune Co. management or its creditors to end a blackout of 23 local stations, DirecTV’s head of programming said.

The satellite broadcaster hasn’t restarted talks with Tribune because it’s not clear who has authority at the company, Executive Vice President Derek Chang said yesterday in an interview. Tribune responded in a statement last night that management has the “full support” of its board to negotiate.

Chang said Tribune’s management agreed to a new contract on March 29 allowing the satellite service to carry the local stations and national cable network WGN America. The deal was nixed a day later by Tribune’s creditors and debt holders, including Oaktree Partners, Angelo Gordon & Co., JPMorgan Chase & Co., Bank of America Corp. (BAC:US) and Citigroup Inc. (C:US), according to a Federal Communications Commission filing yesterday by DirecTV.

“I sent an internal e-mail on Thursday night saying basically we were done,” said Chang, who said he flew to Costa Rica for a vacation, assuming an agreement had been completed. “Still today, I don’t even know who I’m supposed to negotiate with to get a deal.”

Chang said he had negotiated last week with Tribune Broadcasting President Nils Larsen and agreed to terms on March 29 only to have Larsen call the next day to inform him there was no deal.

No Recent Talks

There have been no further discussions and DirecTV still doesn’t know whether Tribune Chief Executive Officer Eddy Hartenstein has the authority to sign off on an agreement, Chang said. Hartenstein was previously DirecTV’s CEO.

“The only person who has reached out to us is the same guy who was undercut by the board,” Chang said, referring to Larsen.

Tribune said in yesterday’s statement that the satellite-TV provider is misstating the facts.

“We never reached agreement with DirecTV on all the terms of the contract -- not in principle, not by handshake and not on paper,” Tribune said in the statement.

DirecTV also accused Tribune of transferring control of its broadcast license to its creditors without permission, a violation of the FCC Communications Act, according to the FCC filing.

Tribune wants DirecTV to pay retransmission fees to carry the local stations. On March 31, DirecTV released a statement saying it had accepted Tribune’s financial terms to broadcast the stations, noting that it would negotiate a separate agreement for the WGN America network. About an hour later, Tribune released a statement saying it had not reached an agreement.

Second Thoughts

Chang said DirecTV had “basically” reached terms on agreements for both the network and the local stations on March 29. The satellite-TV provider later was told that Tribune still had concerns with the network portion of the deal, so DirecTV decided to release a statement on March 31 that acknowledged it had an agreement only for the local stations.

Tribune’s local broadcast stations and WGN America were blacked out to DirecTV’s customers (DTV:US) after midnight April 1. More than 5 million subscribers have lost at least one channel, DirecTV said. Tribune owns local Fox and CW affiliate stations in markets including Los Angeles, New York and Chicago.

Tribune, the Chicago-based owner of the Los Angeles Times and the Chicago Tribune newspapers, filed for bankruptcy in December 2008, one year after a leveraged buyout led by real- estate billionaire Sam Zell.

Since then, the company and hedge funds holding Tribune’s senior debt have fought for approval of a plan to divide ownership among the lenders that financed the $8.3 billion buyout.

“If you think about what’s happened to Tribune as a company, it’s pretty sad what all the hedge funds and banks have done to it,” Chang said.

DirecTV rose 1.2 percent to $49.94 yesterday at the New York close. The shares have advanced 17 percent this year.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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