Tribune verdict: None of the above


It appears certain that Tribune Company will mark its third anniversary in bankruptcy court next month – with no end in sight. After months of considering two competing Chapter 11 reorganization plans, US Bankruptcy Judge Kevin Carey has rejected them both.

Carey’s 126-page opinion leaned toward the reorg plan favored by Tribune’s senior creditors, Oaktree Capital Management, Angelo, Gordon & Co, and JPMorgan Chase Bank, along with Tribune management and the Official Committee of Unsecured Creditors. Even though he called the core of the plan “feasible,” “fair” and “reasonable,” he still raised questions about how it proposes to treat some of the junior creditors. So, the judge urged the parties to go back to the bargaining table and find a solution based on that plan.

The judge was more skeptical of the alternative plan, which was backed by Aurelius Capital Management and other junior creditors. Carey called the projected financial returns from a proposed litigation trust “highly speculative” and noted that when the creditors voted on which plan they preferred the vote was overwhelmingly for the management-backed plan.

If there is no quick agreement on a settlement, Carey said he may be forced to appoint a bankruptcy trustee to resolve the case. That, however, could mean many more months of delay. “The Debtors must promptly find an exit door to this Chapter 11 proceeding,” he warned, or the court will have to go the trustee route.

RBR-TVBR observation: Nothing surprises us about this case anymore, but it certainly had appeared that there would be a decision before the Chapter 11 3rd anniversary next month. This new setback will certainly give pause to potential CEO candidates being recruited by the senior creditors, who would become the new majority owners under either reorg plan.