The Work

June 23, 2010 3:24 PM

Tribune Examiner: This'll Take a Bit Longer

Posted by Zach Lowe

As things stand now, you can set your watch by this: The Tribune Co. bankruptcy case will come to a head in late July, when creditors are scheduled to start voting on the estate's ultracontentious reorganization plan right when a court-appointed examiner releases a report that could jeopardize that very plan. 

That wasn't supposed to be the case. The court-appointed examiner, Kenneth Klee of the Los Angeles-based boutique Klee, Tuchin, Bogdanoff & Stern, initially estimated he and his team could get the report done by July 12 at a cost of about $4 million or $5 million. It did not take Klee long to realize he had been optimistic. And last week, we reported that Klee filed papers indicating the report might take longer and cost as much as $8 million. Today, Reuters reports that Klee has asked the judge to extend his deadline to July 27. 

Right now, creditors are supposed to start voting on Tribune's proposed reorganization plan on July 30, with a confirmation hearing set for mid-August, Reuters says. Among other things, that plan would give control of the company to the lenders (including JPMorgan Chase, represented by Davis Polk & Wardwell) that financed Sam Zell's disastrous leveraged buyout of Tribune, according to court records. Several groups of bondholders, including one particularly loud group of junior bondholders represented by Brown Rudnick, have issues with that prong of the plan. In their view, the Zell buyout was a so-called fraudulent conveyance, meaning it left Tribune effectively insolvent. The examiner is investigating that claim, and any finding by the court that the transaction was indeed a fraudulent conveyance could leave JPMorgan Chase and the other buyout lenders out of the money in the reorganization plan. That would, of course, leave other bondholders to argue about who should control Tribune and how to split up whatever funds the estate (represented by Sidley Austin) can hand out for creditors. 

Klee's request for an extra two weeks could result in the whole schedule of events getting pushed back a bit, Reuters says. 

Meanwhile, White & Case partner Thomas Lauria, who represents Wells Fargo in the case, is set to depose Zell next week. 

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