Tribune Judge Rules on Distribution Rights Under Reorganization

Tribune Co., the publisher scheduled to begin a hearing June 7 for approval of its reorganization plan, got a ruling clarifying some disputes over the order in which creditors will receive distributions from the two trusts created in the plan to bring lawsuits.

In a decision yesterday, U.S. Bankruptcy Judge Kevin J. Carey in Wilmington, Delaware, answered some of the questions left after his rulings in September and December, when he described how Tribune’s assets and lawsuit recoveries should be distributed. In his September decision, Carey said neither of the competing reorganization plans could be approved. At the time, he ruled that the Tribune plan, with modifications, would be easiest to win ultimate approval.

Carey said in yesterday’s ruling that so-called Phones notes, which he ruled were in the amount of $759.3 million, are subordinated to senior notes when it comes to distributions from the trusts.

Calling a 4 percent difference in distribution “immaterial,” Carey said the plan wasn’t unfair to senior noteholders because they are treated the same as other creditors. “The third amended plan’s equal treatment of the senior noteholders and the other parent claims does not amount to unfair discrimination,” he said.

Carey similarly ruled that the so-called EGI notes are subordinated because they were intended to be at the bottom of the capital structure.


The judge ruled that senior noteholders aren’t entitled to payment of post-bankruptcy interest before holders of the Phones notes begin receiving payment. If the trusts manage to recover enough so Tribune can pay creditors in full, Carey said a court could change his ruling on post-bankruptcy interest.

Aurelius Capital Management, Deutsche Bank Trust Co. Americas and Law Debenture Trust Co. of New York had asked Carey to reconsider some of the rulings he made in a 125-page Oct. 31 decision involving the repayment status of the debt-like Phones securities.

Carey previously rejected Tribune’s reorganization plan and a competing proposal by the noteholders. He had also approved the central piece of the company’s plan, a settlement with lenders led by JPMorgan Chase & Co.

The two plans were backed by opposing groups of creditors. JPMorgan and the lenders who funded Tribune’s $8.2 billion buyout in 2007 supported a plan that would absolve them of most legal responsibility for the transaction.

Carey has presided over the case since it was filed in December 2008. Tribune, which is valued at about $6.75 billion, owes creditors about $13 billion, according to court records.

The Chicago-based newspaper and television company filed for bankruptcy one year after the buyout led by real-estate billionaire Sam Zell.

The bankruptcy case is In re Tribune Co., 08-bk-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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