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Judge rejects Tribune reorganization plans

by Chris Nolter  |  Published November 1, 2011 at 8:24 AM
In a Halloween evening ruling, a U.S. bankruptcy judge rejected a pair of competing plans that would reorganize Tribune Co.'s more than $12 billion in debt.

Judge Kevin Carey of the U.S. Bankruptcy Court for the District of Delaware in Wilmington opened his 126-page decision by retelling the parable of the scorpion and the fox, in which the former stings the latter during a river crossing. Inauspiciously, both drown.

"There is no moral to this story," Carey wrote. "It's meaning lies in the exposition of an inescapable facet of human character: the willingness to visit harm upon others, even at one's own peril," he continued. "Our story follows."

The narrative starts with Sam Zell's disastrous 2007 leveraged buyout of Tribune, and the company's 2008 bankruptcy. The Chicago broadcaster and publisher had less than $5 billion in debt before the deal, Carey wrote, and more than $12 billion afterward.

Tribune sought bankruptcy protection in December 2008. Hedge funds have dominated the plans to reorganize the company.

Oaktree Capital Management LP and Angelo, Gordon & Co. submitted a proposal with the support of Tribune, unsecured creditors and J..P Morgan Chase NA. Their plan promised a quick resolution to the LBO law suits.

Aurelius Capital Management LP championed a rival plan that favored pre-LBO debt holders. The noteholder group argues that Tribune's plan would give the lenders that financed Zell's ill-fated buyout a free pass.

Both sides said they were digesting Carey's ruling on Monday evening.

If Tribune and its creditors cannot find an "exit door" to Chapter 11, the judge said, he may appoint a trustee. Carey will hold a Nov. 22 status hearing on the case.

So far, the dispute has cost Tribune's bankruptcy estate $207 million, including fees and expenses billed through Sept. 25, 2011. That doesn't count payouts that the bankruptcy estate does not pick up.



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Tags: bankruptcy | media | restructuring | Tribune

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Chris Nolter

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