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Tribune Asks for Extension on Reorg Plan
CommentsVPA / November 16, 2009
From CHICAGO TRIBUNESignaling that infighting among creditors is bogging down reorganization efforts, Tribune Co. on Friday asked a U.S. Bankruptcy Court in Delaware to give its management team until March 31 to craft a plan to exit Chapter 11 without interference from other parties.
If all goes according to plan and the bankruptcy court agrees to extend management's "exclusivity," which was due to expire at the end of this month, Tribune Co. indicated it would emerge from bankruptcy by May 31.
But the Chicago-based media company is also trying to avoid a lengthy and costly legal battle with some creditors, who are likely to recoup little of their investment in the company, given the distressed values of its core newspaper and TV assets.
A dissident bondholder group has accused the company and its senior lenders of hiding "millions of dollars" worth of fees from the court and is conducting a sweeping investigation of the $8.2 billion leveraged buyout that gave real estate magnate Sam Zell control of Tribune Co., which owns this newspaper.
In a separate filing Friday, Tribune Co. asked the court to hold a status conference on Dec. 1 that would bring warring creditor factions together before the court to lay the groundwork for a resolution to the battle.
The dispute centers on whether the deal structured by Zell's team and lenders like JPMorgan and Merrill Lynch to take the company private in 2007 represented "fraudulent conveyance," a legal term meaning the debt-heavy deal, rather than the failing economy, left the firm insolvent from day one.
Led by trustee Law Debenture Trust Co., the bondholders seek to invalidate more than $10 billion in claims held by the financial institutions that financed the deal. That would leave Tribune Co.'s bankruptcy estate to be divided among junior creditors.
A Tribune Co. spokesman declined to comment. But in a recent TV interview, Zell said the fraudulent conveyance argument was not valid.