Judge Hints He'll Approve Tribune Bankruptcy Plan
07/11/2012| 01:56pm US/Eastern
--Judge indicates he will confirm Tribune Co. Chapter 11 plan
--Ruling will be issued by Friday
--Tribune's bankruptcy exit plan puts newspaper publisher and broadcaster into hands of creditors
The judge overseeing Tribune Co.'s Chapter 11 case disposed of two minor sticking points and indicated Wednesday he is prepared to sign off on the company's bankruptcy-exit plan.
"I have a 50-page draft of an opinion which, subject to closure on those two issues, I'm prepared to issue," Judge Kevin Carey said at a hearing in the U.S. Bankruptcy Court in Wilmington, Del. "You'll have it by Friday."
Pressed by Tribune attorney James Bendernagel of Sidley Austin LLP for a hint as to whether the judge was inclined to confirm the Chapter 11 plan, Judge Carey noted he had just raised the two problems he saw with Tribune's Chapter 11 plan at the court hearing and suggested they could be easily resolved.
"Does that give you your answer?" Judge Carey said. As the hearing ended a few hours later, Carey disposed of both remaining open items, clearing the way to confirmation for Tribune, of Chicago.
The in-court disclosure heralds the beginning of the end of a long sojourn under bankruptcy protection for the company that publishes the Los Angeles Times, the Chicago Tribune and other newspapers and operates a chain of broadcast stations. A signed confirmation order, however, signals the start of action before the Federal Communications Commission, which must approve the transfer of the broadcast licenses to new owners.
Tribune filed for bankruptcy protection in 2008, less than a year after a disastrous buyout loaded it with debt. Twice before, Tribune has failed to win confirmation of its Chapter 11 plan.
Legal defects that had snarled earlier versions of the restructuring have been worked out. The core of Tribune's Chapter 11 plan was approved early on. It is a debt-for-equity swap that will make investors--led by Oaktree Capital Group LLC (>> Oaktree Capital Group LLC), J.P. Morgan Chase & Co. (>> JPMorgan Chase & Co.) and Angelo Gordon & Co.--the new owners of the company.
Lower-ranking creditors will get a shot at recovery from a litigation trust that will pursue damage claims related to the 2007 leveraged buyout. One of the details of how that trust is to operate is one of the two items that gave Judge Carey misgivings about Tribune's Chapter 11 plan.
Aurelius Capital Management, a big investor in Tribune debt, balked at language that it said would bind the hands of the courts that will decide Tribune-related postbankruptcy lawsuits.
Judge Carey said he saw merit in Aurelius's position but also saw value in arguments that the plan should have some language to keep the "contentiousness" that had marred the bankruptcy case from spilling into the post-Chapter 11 lawsuits.
The judge said he had some language for the parties to consider that might do the job. Tribune and Aurelius agreed to the language, with some balking on Aurelius's part. Judge Carey said he would overrule any remaining objection from Aurelius about the revised language.
Judge Carey's other reservation about Tribune's Chapter 11 plan related to fears from high-ranking Tribune executives that the Chapter 11 plan hampered their rights to have the company indemnify them if they should be held to account for the deal that damaged the company.
A lawyer for the objecting ex-Tribune executives said he would withdraw the objection after getting an explanation from the company about how the rights would be affected.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com.)
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