Tribune Bankruptcy Reorganization Plan Given Until February

03/18/2010 05:12 am ET | Updated May 25, 2011

WILMINGTON, Del. — A Delaware bankruptcy judge on Tuesday granted the Tribune Co. more time to submit a Chapter 11 reorganization plan.

Judge Kevin Carey agreed to extend the period under which Tribune has exclusive rights to file a plan to Feb. 28, with the possibility of a further extension after a mid-February hearing.

Tribune said in its request for an extension that many of the elements of a reorganization plan are in place, but that it needs more time to review issues surrounding the leveraged buyout that took the company private in 2007. The $8.2 billion buyout, which saddled Tribune with massive debt and which some Tribune creditors point to as the root cause of its bankruptcy, is being reviewed by the company, its creditors committee and other parties.

In requesting a third extension of the exclusivity period, Tribune said its goal is to deal with any potential claims stemming from the buyout in its reorganization plan.

But a group of credit agreement lenders who hold more than $4 billion in Tribune debt objected to another extension of time and asked for permission to submit their own reorganization plan focused on Tribune subsidiaries.

Bruce Bennett, an attorney for the credit lenders, said all of Tribune's business operations are being conducted by the parent company's subsidiaries. He argued that the lenders' reorganization plan would free Tribune's subsidiaries from the constraints of bankruptcy, leaving the parent company on its own to resolve issues surrounding the buyout. Tribune has said litigation related to buyout could have an adverse effect on its businesses, he noted.

"The press articles will talk about how the cases are mired in litigation of uncertain duration ... and the debtors and all their subsidiaries will be held hostage to it," Bennett said.

But Carey indicated that Tribune deserves the opportunity to reach a global resolution of claims that involves both the parent company and its subsidiaries. He agreed with Tribune attorneys that the company is highly integrated and said he saw no benefit in "breaking up the corporate family."

But while granting the time extension, Carey agreed to only three months, not the four months the company requested.

Graeme Bush, an attorney hired by the creditors committee to investigate the leveraged buyout, said document production has been proceeding well, but that the committee is still waiting for Merrill Lynch, one of the LBO lenders, to turn over e-mails.

Madlyn Gleich Primoff, an attorney for Merrill Lynch, said the company has not been dragging its feet but was presented with a burdensome request that resulted in the identification of more than 330,000 documents.

"This is way too burdensome," she said, adding that Merrill was willing to discuss a narrower document search.

Carey told attorneys that if they cannot reach an agreement on document production, he will consider a motion seeking direction from the court.

In another ruling Tuesday, Carey ordered that Tribune provide more details regarding payments from certain of its non-debtor entities to law firms and other professionals engaged in bankruptcy-related work for the LBO lenders.

Tribune bondholders contend that the payments, totaling about $25 million, are improper because the lenders are unsecured creditors being paid without court approval.

In a filing with the court, the bondholders asked that the payments be halted, that a full accounting be made, and that the lenders return the payments.

While withholding judgment on whether the payments were proper until he holds an evidentiary hearing early next year, Carey said Tribune had not provided adequate disclosure to other parties involved in the bankruptcy.

"I think it was a tactical error, whether there was nefarious motive or not, not to make a disclosure on the record," the judge said.

Bryan Krakauer, an attorney for Tribune, agreed to provide more details regarding the payments and said further payments would be suspended pending the evidentiary hearing.

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