RBR-TVBR readers will remember Aurelius Capital Management as an activist securities holder in the Citadel Broadcasting Chapter 11 bankruptcy, trying unsuccessfully to change the terms of the reorganization. Now the vulture capital fund is trying to change the course of the Tribune Company Chapter 11 reorganization.
Aurelius is now asking US Bankruptcy Judge Kevin Carey to take control of Tribune Company away from the current management and appoint a Chapter 11 Trustee to run the company. The motion seeking a trustee claims that “Management’s dishonesty relating to the LBO transactions is well-documented and supported by the Examiner’s independent conclusions,” referring to the report by court-appointed Examiner Kenneth Klee. In addition to the findings by Klee that two senior staffers in the financial department of Tribune misrepresented the financial viability of the buyout, Aurelius also included allegations of other improper activity. Those passages were redacted from the copy of the motion made public, so it is not known who those allegations refer to or what they are alleged to have done.
Aurelius also claims a conflict of interest by a law firm involved in the bankruptcy negotiations as justification for appointing a trustee. In addition to all that, it says the acrimony among the parties involved and the “lack of creditor confidence and inability to confirm a plan” for reorganization are reason enough to have a trustee take over.
The fund doesn’t have any quarrel with Judge Carey’s recent appointment of a mediator to try to forge agreement on a reorganization plan at Tribune, but claims that a trustee would actually help the mediation process because a truly disinterested party would be “rigorously identifying, assessing and preserving billions of dollars of claims.”
A hearing on the Aurelius motion is set for next Wednesday (9/22).
