Tribune Co's warring parties brace for key ruling

Reuters News
Posted: Oct 20, 2011 2:45 PM
Tribune Co's warring parties brace for key ruling

(Reuters) - Tribune Co, the publisher of the Los Angeles Times and Chicago Tribune newspapers, may be nearing the end of its bitter bankruptcy that quickly followed a disastrous leveraged buyout led by financier Sam Zell.

Delaware's chief bankruptcy judge, Kevin Carey, said in court on Wednesday that he was "within days" of issuing his opinion on two competing reorganization plans.

The ruling has been awaited since closing arguments in June.

The judge's ruling could clear the way for the company, which also owns more than 20 television stations, to come out of bankruptcy after nearly three years. Control would pass to a group of lenders that includes JPMorgan Chase & Co and hedge funds.

Carey must decide a range of legal questions, but the key issue comes down to whether the lenders and the company have agreed to a reasonable deal to settle liability for the bankruptcy.

Lawyers involved said they expect to spend their weekend plowing through a ruling that could run hundreds of pages.

Zell's buyout, which the real estate mogul later called the "deal from hell," left Tribune with a crushing $13 billion in debt. Chapter 11 followed in 2008 less than a year after the deal closed, and it wiped out the value of more than $1 billion of Tribune notes.

The company-backed bankruptcy exit plan proposes compensating noteholders by providing them with about $480 million. In return, noteholders would surrender their right to sue.

Noteholders proposed a competing plan that would allow the company's operations to slip out of bankruptcy while they sued the lenders over the buyout to recover their losses.

While some of the ownership would remain unsettled under the noteholder plan, the lenders would have control of the company under either plan.

Those lenders include hedge funds such as Angelo, Gordon & Co that have amassed large investments in newspaper companies that have reorganized in bankruptcy. They include the publishers of leading papers in Philadelphia, Minneapolis, Denver, San Diego and Orange County, California.

Both plans would establish a "litigation trust" that would pursue legal claims stemming from the bankruptcy, including against Zell for his role in the buyout.

The case is In Re Tribune Co, U.S. Bankruptcy Court, District of Delaware, No. 08-13141.

(Reporting by Tom Hals in Wilmington, Del., editing by Matthew Lewis)