Tuesday, October 5, 2010

Tribune Co. talks continue; judge weighs failure

By Michael Oneal

The battling parties in Tribune Co.’s fractious bankruptcy case planned to sit down Monday for another day of mediation aimed at forging a settlement of legal claims surrounding the company’s 2007 leveraged buyout.

But at a status hearing in Delaware before the mediation session began, U.S. Bankruptcy Judge Kevin Carey spent much of his time anticipating how to proceed assuming the mediation fails.
“I can bring the parties to water but I can’t make them drink,” Carey said with a note of exasperation in his voice. He added that the case “is on the brink of going in a very bad way.”

Tribune Co. lead counsel James Conlan of Sidley Austin didn’t disagree.

“It’s like a big dysfunctional family reunion,” he said of Monday’s mediation attempt.

Tribune Co., which owns the Chicago Tribune, Los Angeles Times, WPIX, WGN, KTLA, and other media assets, spent two days a week ago in settlement discussions with creditors mediated by Carey’s colleague in the Delaware court, U.S. Bankruptcy Judge Kevin Gross. They ended with an agreement between Tribune Co. and two of its biggest senior debt holders, hedge funds Oaktree Capital Management and Angelo Gordon & Co.

But the pact, struck with hedge funds Angelo, Gordon & Co. and Oaktree Capital Management, failed to win the support of a number of other key constituents in the case, meaning the mediation process has yet to forge a solution to a Bankruptcy Court battle that has already gone on for almost 22 months.

U.S. Bankruptcy Judge Kevin Gross, the court-appointed mediator, acknowledged in a court filing Tuesday that the mediation was incomplete but said he did not consider it closed. He expressed his confidence that the new plan "will lead to additional constructive discussions between and among the debtors and other parties."

Tribune Chief Restructuring Officer Don Liebentritt also sounded a note of optimism. "We remain confident that additional settlements will be reached," he said in a company statement.

Significant disagreements remain, however, between the new Tribune alliance and a variety of holdouts, including senior lender JPMorgan Chase, the Official Committee of Unsecured Creditors and junior note holder Aurelius Capital Management.

Other important creditors — most notably senior lenders represented by JPMorgan Chase and a junior bond group led by hedge fund Aurelius Capital Management – showed no intention of joining a settlement. Sources close to the matter said that though Gross kept the mediation open and organized the new session Monday, the multilevel disagreements between the various parties remained sharp.

Carey acknowledged as much at the status hearing Monday, when he noted that he may have less hope for the mediation than Gross, who Carey said is known for “keeping at (settlement discussions) until the last breath.”

Assuming that that various parties will file new plans of reorganization if the mediation fails, Carey set a deadline of Oct. 15 for those filings and set up procedures to make it easier for creditors to compare competing plans before a disclosure statement hearing Nov. 9.

Carey’s goal, he said, was to try to streamline as much as possible what is likely to become an even more messy situation.

“I wish you the best of luck,” he said, adjourning the status hearing and sending the parties off to the mediation session with Gross.

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