Friday, February 19, 2010

Judge Approves Extension for Tribune Reorganization Plan

By RITA K. FARRELL The New York Times
With additional material By By RANDALL CHASE AP Business Writer

A federal judge on Thursday gave the Tribune Company more time to file a reorganization plan for exiting Chapter 11 bankruptcy protection.

Chief Judge Kevin J. Carey of the United States Bankruptcy Court in Delaware extended the deadline to March 31 from Feb. 28 after a restructuring specialist hired by Tribune, David Kurtz of Lazard, testified at a hearing that that the company needed time to achieve “a global and hopefully consensual resolution.”

Under questioning by a Tribune lawyer, James Bendernagel Jr. of Sidley & Austin, Mr. Kurtz described himself as an “honest broker” and said progress was being made.

Judge Carey said he supported an extension because it “would facilitate moving the case forward.”
The judge, who said he was not eager to see the case fall into what one creditors' attorney described as a "litigation morass," said the extension of time may be Tribune's "last, best opportunity" to achieve a resolution acceptable to all parties.
David Kurtz, a managing director with Tribune's financial adviser, Lazard Ltd., said negotiations had reached a "delicate stage." If Tribune were not allowed more time, it would be forced to submit a reorganization plan with a proposed global settlement that likely would be challenged in court, delaying or derailing a negotiated settlement, he said.

"When litigation begins, people retreat into litigation mode," said Kurtz, who noted that fees for attorneys and other professionals already are costing Tribune's bankruptcy estate $8 million to $10 million a month.

Creditors generally agreed not to challenge the extension by the judge, who also postponed until April 13 a hearing on a motion filed by a group of bondholders who want an examiner appointed to investigate the leveraged buyout that the real estate tycoon Sam Zell used to take Tribune private in December 2007. In addition, the judge delayed hearing a request from the company’s committee of unsecured creditors for permission to pursue litigation against the banks that financed the buyout.

In court papers, the holders of $1.2 billion in subordinated debt contended that the leveraged buyout was a “strange cure for the adverse business environment for media companies” and accused Tribune, which owns The Chicago Tribune, The Los Angeles Times and The Baltimore Sun, among other papers, of transferring property to a receiver that knew the intent was to defraud debtors.

Tribune, which owns the Los Angeles Times, Chicago Tribune, The (Baltimore) Sun and other dailies, along with 23 TV stations, filed for bankruptcy protection in December 2008 because of dwindling advertising revenue and a crushing debt load of $13 billion, much of it stemming from the buyout. The leveraged buyout added $9 billion to Tribune’s debt load, driving it into bankruptcy a year later in December 2008.

The paid advisers for the L.B.O. were JPMorgan Chase, Merrill Lynch, Citicorp North America, Bank of America and Barclays Bank. The same banks also became the senior secured lenders for the leveraged buyout, according to court papers.

In objecting to the postponement of the examiner motion, Robert J. Stark, a lawyer for the Wilmington Trust Company, told Judge Carey: “No one is talking to us. No one. I was ejected from the room when I asked to join in the settlement” discussions. He predicted that “if this is put off for 30 days, we’re going to have a trial at confirmation time.”

After the hearing, Mr. Stark said, “What’s going on in this case right now is a value allocation issue between the bonds and the banks,” with bondholders claiming the right to most of the estate and the banks to all of it.

'The primary targets of the estate litigation remain at the helm of the company, that being Sam Zell and his colleagues,” Mr. Stark said. “All that we heard today is that they’re engaged in negotiations with the other primary target, the L.B.O. banks. Having Sam Zell as ‘honest broker’ between the banks and the bonds is a strange proposition for us.”

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