Friday’s deadline for dissident creditors to file their own Chapter 11 reorganization plan for Tribune Company did not pass without action. Three creditor groups filed their own plans and argued that they are superior to the one backed by company management and a group of senior lenders. Also, some creditors have now sued the banks who funded the ill-fated 2007 leveraged buyout (LBO).
As expected, Aurelius Capital Management, with support from some other junior creditors, filed a competing plan which they claim is more fair than the management-backed one and will allow the company to quickly emerge from Chapter 11, while legal battling among the various creditor groups would go on.
A dissident group of senior creditors who are not part of the deal with management filed a competing plan of their own. Also, a group led by hedge fund manager King Street Capital filed a 4th competing plan.
Each has its own take on who is entitled to what as a result of the report of US Bankruptcy Court appointed examiner Kenneth Klee. It may take a new round of hearings before Federal Bankruptcy Judge Kevin Carey in Delaware for him to decide which of the four plans may be entitled to a vote by the Tribune Company creditors.
Also on Friday, a group of creditors holding Tribune Company debt sued the four banks who arranged the LBO, claiming that they knew when they arranged $3.7 billion in new loans that the media company could not ever repay them. The plaintiffs, led by a couple of vulture capital firms that buy up distressed debt, claim in the lawsuit filed in a New York court that the banks themselves had no exposure to the loans, but collected more than $120 million in fees for arranging them.
RBR-TVBR observation: The last thing Tribune Company’s employees need right now is further delay in wrapping up Chapter 11 so a new board can take over and hire a new CEO – but delay is what they’re getting. The odds are good that the management-backed plan will be the one eventually approved, but the other three will get to exercise their legal rights to be heard before any vote by creditors is taken.