The Work

August 27, 2010 11:48 AM

More Turns in Troubled Tribune Bankruptcy

Posted by Brian Baxter

After nearly 21 months of Chapter 11 proceedings, the Tribune Company is still struggling to appease angry creditors and cobble together a reorganization plan that will allow the publishing giant to emerge from bankruptcy.

Tribune, which now has $1.6 billion in cash on hand, is expected to file an amended reorganization plan on Friday. The plan comes a week after Tribune's lead bankruptcy lawyer--Sidley Austin corporate reorganization cochair James Conlan--told a court that talks between the Chicago-based company and creditors had once again broken down.

A previous agreement between rival parties collapsed after Tribune bankruptcy examiner Kenneth Klee of Los Angeles's Klee, Tuchin, Bogdanoff & Stern issued a report in July concluding that a $12 billion leveraged buyout of the company in April 2007 could have constituted a fraudulent conveyance.

Klee's report also concluded that Brown Rudnick--counsel to a group of junior bondholders fronted by the Wilmington Trust Company--had not violated a confidentiality order by failing to redact sensitive financial information from a key complaint filed in the case.

JPMorgan Chase, represented by Davis Polk & Wardwell, and other senior creditors are reportedly considering bringing in Michael Eisner, former CEO of the Walt Disney Company, as chairman for Tribune if they gain control of the company after it exits Chapter 11. But an agreement on a reorganization plan doesn't appear to be any closer.

On Thursday, according to Bloomberg, more than a dozen lawyers for Tribune, its committee of unsecured creditors (advised by Chadbourne & Parke), and several hedge funds opposing the company's reorganization plan met near a storage room in the clerk's office in a U.S. bankruptcy court in Delaware. The meeting reportedly did not lead to a new agreement.

"I can't say anything," James Johnston, a partner at L.A.'s Hennigan, Bennett & Dorman, told reporters while leaving the courthouse. Bloomberg reports that Johnston's firm represents hedge funds that hold $3.6 billion in Tribune senior loans, while Thomas Lauria, global head of the financial restructuring and insolvency practice at White & Case, is advising junior lenders owed $1.6 billion.

Lauria scoffed at the notion of Eisner coming on board when a Bloomberg reporter asked him about it on Thursday.

"Maybe they'll make Lee Iacocca chairman," he said, referring to the former head of Chrysler who used government loans to change the automaker's fortunes 30 years ago.

The Los Angeles Times, a Tribune publication, has more here on what a reconstituted Tribune might look like with ownership divided among JPMorgan, hedge funds, and other senior lenders.

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