Tribune Co. creditors asked a judge to halt the newspaper chain’s plan to exit bankruptcy for six months without requiring them to post a $1.5 billion bond.
Aurelius Capital Management LP is seeking to overturn a bankruptcy court order that required the bond to protect Tribune lenders from any delay stemming from an appeal of the exit plan. The hedge-fund manager asked the U.S. District Court in Wilmington, Delaware, to quickly hold a hearing.
“An expedited hearing on the emergency motion will help safeguard Aurelius’s rights to challenge the bankruptcy court’s erroneous conclusions,” the hedge fund’s attorney, David M. Zensky of Akin Gump Strauss Hauer & Feld LLP, said in court papers filed today.
On Aug. 22, U.S. Bankruptcy Judge Kevin Carey gave Aurelius and other Tribune noteholders the chance to temporarily halt the television and newspaper company’s exit from bankruptcy, if they agreed to post a $1.5 billion bond.
Unless that requirement is overturned, Aurelius and the other creditors would have to put up the bond by Aug. 29 to prevent Tribune from implementing its reorganization plan and exiting bankruptcy, possibly later this year.
Carey said he agreed with noteholders who claimed they would be “irreparably harmed” if Tribune exits before creditors have a chance to try to overturn the reorganization plan by appealing it to a higher court.
Aurelius and other holders of Tribune’s oldest debts say Carey erred in approving Tribune’s reorganization plan and a related legal settlement. That settlement ended some lawsuits against lenders that financed the more than $8 billion leveraged buyout of Tribune in 2007.
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. Without a temporary halt to the reorganization plan, Tribune will be free to move 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 if 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).