A group of Tribune Co. lenders dropped its reorganization plan for the newspaper publisher “unilaterally,” without settling their differences with the hedge funds behind competing proposals, its lawyer said.
The decision “was not the result of mediation or the result of any agreement” Evan Flaschen, an attorney who represents the so-called step-one lenders, said today in U.S. Bankruptcy Court in Wilmington, Delaware.
The step-one lenders hold about $767.7 million of the debt Tribune borrowed in the first half of the company’s two-part buyout in 2007. They filed court papers last night announcing their intention to abandon their proposal for bringing the company out of bankruptcy by distributing $6.75 billion in stock, loans and cash to creditors owed about $13 billion.
The withdrawal was a “relatively major development,” Norman Pernick, an attorney for Tribune, told U.S. Bankruptcy Judge Kevin J. Carey.
A rival group of lenders, led by New York-based JPMorgan Chase & Co. (JPM) and the hedge funds Angelo Gordon & Co. and Oaktree Capital Management LP, are sponsoring one of the three remaining plans and are supported by Chicago-based Tribune, which owns the Los Angeles Times, television stations and stakes in cable channels. The other two plans are backed by lower-ranking creditors.
The step-one lenders held debt that was used in the first part of the two-part buyout that took the Tribune private in 2007 using more than $8 billion in loans. They didn’t say whether they will continue to oppose the other plans when they come before Carey next year for approval.
The plans differ on how to split up ownership of Tribune once it exits bankruptcy and on how to address lawsuits over who was to blame for the buyout, led by Sam Zell, the real estate billionaire.
Tribune filed for bankruptcy in 2008, one year after the buyout. The company owes creditors about $13 billion. The company is worth about $6.75 billion, according to court records.
A court-appointed examiner concluded that lower-ranking creditors were likely to win a lawsuit over the buyout.
The bankruptcy case is In re Tribune Co., 08-bk-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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