Tribune Co. met with creditors opposed to its reorganization plan, six days after the bankrupt publisher said it was shut out of discussions about its future.
More than a dozen attorneys, including lawyers for Tribune, its committee of unsecured creditors and hedge funds opposed to the company’s reorganization plan, met near a storage room today in the clerk’s office in the U.S. Bankruptcy Court in Wilmington, Delaware, where the Chapter 11 case was filed.
After the hour-long meeting, none of the attorneys would comment on why they had gathered in Wilmington from Chicago, New York and Los Angeles, where the lead lawyers in the case are based. Tribune owns the Los Angeles Times and Chicago Tribune newspapers, as well as broadcast stations and cable channels.
“I can’t say anything,” James O. Johnston of Hennigan, Bennett & Dorman LLP said as he left the courthouse. Johnston, who is based in Los Angeles, represents hedge funds that earlier this year held $3.6 billion of the company’s senior loans.
Tomorrow, Chicago-based Tribune is scheduled to release a new version of its reorganization plan. On Aug. 20 the company announced its previous proposal had to be rewritten because JPMorgan Chase & Co. and other lenders had terminated an agreement to settle their differences and support Tribune’s exit from bankruptcy.
The end of the deal forced Tribune to delay the start of a court proceeding to determine how ownership of the company would be split among senior lenders, including JPMorgan and the hedge funds.
Some of those lenders are considering installing former Walt Disney Co. Chief Executive Officer Michael D. Eisner as chairman should they gain control of Tribune after it exits bankruptcy, the Los Angeles Times reported today, citing unidentified people with knowledge of the discussions. Eisner didn’t respond to a request from Bloomberg for comment.
The report was greeted with skepticism by some who attended today’s meeting.
Attorney Thomas Lauria laughed when asked about it.
“Maybe they’ll make Lee Iacocca chairman,” Lauria said, referring to the former head of Chrysler Corp. who used a government loan guarantee in the 1970s to help turn around the automaker.
Lauria, who represents junior lenders owed $1.6 billion, declined to comment on today’s meeting.
It was unclear whether lawyers for low-ranking noteholders owed $1.2 billion attended the meeting. Those noteholders would get nothing under Tribune’s plan. Their attorney, Robert Stark, didn’t immediately return a call for comment.
In July, bankruptcy examiner Kenneth N. Klee released a report in which he found part of the company’s 2007 buyout may be a fraudulent transfer. Klee found evidence of a fraudulent transfer involving the second part of the two-part deal that real-estate billionaire Sam Zell used to take over the company.
Klee concluded that lower-ranking creditors are “somewhat likely” to win a lawsuit based on the smaller piece of the $8.3 billion transaction.
In bankruptcy, a fraudulent transfer means a company took on debt that it knew it couldn’t repay, or got nothing of value in return for the borrowing.
The noteholders, represented by their agent, Wilmington Trust Co., say Klee’s report supports their contention that problems with the buyout justify stripping senior lenders of their status as the first creditors to be paid once a plan to reorganize the company is approved by the judge overseeing the case.
Tribune’s 5.25 percent bonds due in 2015 rose about 13 percent to almost 45 cents on the dollar today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).