Published on Tuesday, 29 March 2011 22:17
Last month, things were looking brighter for Tribune Company and its many creditors, as it appeared the over two year long bankruptcy case would be finally settled in early March. Out of the four competing reorganization plans presented to the US Bankruptcy Court, two plans dropped out and threw their support behind the Tribune-backed plan. With the majority of creditors now satisfied with that plan, it seem it would only be a matter of time after the early March hearings began that an approved reorganization plan would be in place and the company could then begin to exit bankruptcy, with the creditors taking over majority ownership. That didn't happen.
The junior creditors, led by hedge fund Aurelius Capital Management have put up a fierce fight, as well as strong legal arguments as to why the Tribune-backed plan should NOT be approved, and the plan they back should be the approved upon one.
Just over a week ago, US Bankruptcy Judge Kevin Carey said he was extremely close to declaring the bankruptcy case & hearings deadlocked. Neither plan would be approved and neither side wished to budge on their demands. What was thought by some would have only a week of discussions, turned into two weeks of heated trials that only went in circles. The Judge has demanded that the two sides work out a compromise that will work for all involved. Both sides have been warned that without a compromise plan, the case could be given to a Chapter 11 trustee who will make decisions no sides will enjoy.
The Tribune Company and its senior lenders -- primarily JPMorgan Chase & Co., Angelo Gordon & Co., and Oaktree Capital Management -- back a plan that allows the senior lenders to own the company, while bondholders will get about one-third of their money back. It would also settle legal claims among the parties to the bankruptcy. Aurelius Capital Management and a group of junior bondholders back a plan that calls for large trust funds to be established that would cover any additional legal claims that could (and more than likely, would) come due to the Sam Zell-led leveraged buyout of TribCo in 2007. The senior creditors argue that too much money would be tied up in potential litigation for too many years, leaving not enough for the company itself.
In a bit of surprise, the junior creditors budged some on their firm stance yesterday. A revised reorganization plan for Tribune Company was submitted to the courts. The new plan calls for smaller-sized trust funds to be set aside for future litigation stemming from the Tribune leveraged buyout. Their hope is that by lessening their firm stance on the large amounts of money set aside, it will appease the senior creditors and be approved by the Judge.
Aurelius Capital Management is known for its stubborn ways in bankruptcy court trials. They are not known for their compromises, which makes yesterday's plan that much more of a surprise to some. Others see it as Aurelius Capital had little choice but to try and find some middle ground before the judge takes it out of the hands of everybody involved.
So far, attorneys for Tribune Company and the senior lenders & bondholders have not commented on the newly submitted revised plan.
The bankruptcy hearings are set to resume in mid-April.
In other Tribune bankruptcy news, Judge Kevin Carey ruled this month that Tribune Company creditors, who are determined to gain back money from shareholders that profited from the controversial buyout, may now file claims with state courts. Even if creditors already filed suit, they may now file a secondary round of lawsuits, but they have until June 4 in which to file in state court.
The Chicago-based Tribune Company is the country's biggest media corporation in bankruptcy. It filed for bankruptcy in December 2008, with approximately $13 billion in debt, less than one year after real estate developer Sam Zell completed a more than $8 billion leveraged buyout of the media giant. According to court records, TribCo is valued at about $6.75 billion -- although that number has been challenged in this month's trials.
Tribune Company owns twenty-three television stations, thirteen newspapers, various magazines, one radio station and many other websites and companies. Locally, among the company's properties owned include the Chicago Tribune, RedEye, Hoy, Chicago Magazine, Naperville Magazine, WGN-AM, WGN-TV, CLTV, and WGN America.