Tribune Co. creditors appealed the newspaper chain’s reorganization plan and asked a judge to temporarily halt the company’s effort to exit bankruptcy.
Aurelius Capital Management LP and other holders of Tribune’s oldest debts asked U.S. Bankruptcy Judge Kevin Carey to suspend his order approving the plan and a related legal settlement until a higher court reviews the case. Aurelius claims Carey erred when he approved a settlement that ended some lawsuits against lenders that financed the more than $8 billion leveraged buyout of Tribune in 2007.
The creditors hold debt that preceded the buyout loans and claim that the settlement robbed them of the ability to collect by leaving Tribune insolvent. They want the settlement set aside so they can sue.
The “settlement fell far below the lowest rung in the range of reasonableness,” Aurelius said in court papers filed yesterday. Under the reorganization plan, the lenders who funded the 2007 buyout will own Tribune after it exits bankruptcy.
Tribune, based in Chicago, owes creditors about $13 billion. The company is valued at more than $7 billion, Tribune said in court papers. Tribune owns the Los Angeles Times, the Chicago Tribune and television and radio stations around the country.
Tribune Chief Executive Officer Eddy Hartenstein told employees in an e-mail that he expects the appeals to fail.
“We also do not expect that these appeals will interfere with our efforts to emerge from bankruptcy as soon as possible,” he said in the message.
One of the pre-buyout creditors, Law Debenture Trust Co. of New York, is seeking to speed up the normal bankruptcy appeal process by asking the U.S. Court of Appeals in Philadelphia to hear the case, instead of sending it first to a federal district court in Wilmington.
Should Carey reject the request to halt the case, Tribune would be free to move on to the next phase in the bankruptcy -- winning approval from federal regulators to transfer its radio and television licenses to the proposed new owners.
Tribune officials have said the company will be able to exit bankruptcy this year should federal regulators approve the reorganization plan and the license transfers.
The case is In re Tribune Co., 08-bk-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).