By Michael Oneal, Tribune reporter
Questions and answers as lawyers for media firm, creditors head to confirmation hearings in Delaware
After 27 months of legal wrangling, Tribune Co. and its creditors are finally headed into what could be the deciding chapter of the company's tangled bankruptcy saga.
The case will enter what bankruptcy law practitioners call confirmation hearings Monday, and for the next two weeks U.S. Bankruptcy Judge Kevin Carey in Delaware will hear evidence from an army of lawyers arguing for and against two competing visions of how to restructure the Chicago-based media conglomerate.
Here are some answers to help explain where the case stands as the battle begins:
Q What are confirmation hearings?
A Confirmation hearings in a bankruptcy case are the judge's opportunity to sign off on a plan of reorganization negotiated between the company and its creditors. There typically is a single plan. The Tribune Co. case features two competing plans proposed by two highly litigious groups of combatants. And given the personalities involved, most observers expect a shootout as lawyers try to convince Carey that their plan provides the fairest result for the parties most harmed by the company's financial collapse.
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Chief Judge Kevin J. Carey U.S. Bankruptcy Court District of Delaware |
Tribune Co. and the Official Committee of Unsecured Creditors in the case have joined with hedge funds and senior debt holders Oaktree Capital Management and Angelo, Gordon & Co. to propose one plan. They are opposed by Aurelius Capital Management, a hedge fund that owns much of Tribune Co.'s junior debt and has organized a coalition of investors to try to squeeze a higher recovery from the senior group.
Q What will be decided, and when?
A Based on the evidence offered during the confirmation hearings, Carey will rule on which plan serves the greater good. He has allotted two weeks for the arguments between the plan proponents, but he likely will need several more days to consider objections to the plans from other parties, such as the U.S. Justice Department or state taxing authorities. It may take another month for him to collect post-trial briefs, attorneys say.
How long it takes Carey to issue a decision after that is anybody's guess. But given the high profile and complexity of the case, few close observers are predicting a quick outcome.
Q Why is the case taking so long?
A Many experts say the Tribune Co. case has become Exhibit A for concerns that the bankruptcy process can get gridlocked by hedge funds and other investors that buy corporate debt for pennies on the dollar after a company files for Chapter 11 protection and then try to extract a profit via aggressive legal tactics.
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| Vultures picking over a carcass |
That has resulted in warring factions of creditors/investors seeking to capitalize on legal disputes stemming from the company's 2007 leveraged buyout, led by Chicago financier Sam Zell. Those legal issues, which pit a group of junior creditors against company management, Zell and holders of the debt used to finance the buyout, are very complex, and they gained steam when a court-appointed examiner last year said that part of the transaction was likely responsible for making the company insolvent.
Since then, Carey has strongly encouraged the two sides to strike a compromise. But even after he appointed one of his colleagues to mediate the solution, no comprehensive truce emerged.
Q Is there still hope that the two sides could settle?
A Sources close to the case say there are no signs of thawing between the senior creditors and Aurelius. But they also say that in bankruptcy, anything can happen. A breakthrough settlement could be forged in the crucible of the confirmation hearings, as Carey signals his leanings one way or the other and the opponents weigh their chances. That could mean an entirely new plan or adjusting one of the existing two.
Finding a solution is theoretically in everyone's interest financially, given the incredible cost of bankruptcy. That is, everyone but the lawyers and other professionals administering the case. They've racked up well over $200 million in fees so far.
Q When might Tribune Co. emerge from bankruptcy?
A That depends on when Carey arrives at a decision. Once that happens, it will take several months to implement the winning plan. If Aurelius loses, however, that may not be the end of it. The fund has appealed decisions that didn't go its way in the past, and many observers expect it will do so in this case.
Q What will the company look like when this is over?
A Both plans anticipate that Tribune Co., which owns the Chicago Tribune, Los Angeles Times and almost two dozen TV stations, will remain intact, at least for now. But it will be owned by lenders and hedge funds that will trade their billions in claims for stock in a new company that ultimately will be publicly traded. The composition of that ownership group will depend on which plan Carey chooses and the outcome of possible further litigation.
But it is likely, based on the size of their claims, that senior creditors led by JPMorgan Chase, Oaktree and Angelo Gordon will end up as majority owners. They will pick a new board to run the company, which likely will pick its own management team.
Note: All pictures were added here by Broadcast Union News are not meant in any way to reflect the opinions of either Michael Oneal, the Chicago Tribune, nor the Tribune Company.
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