Published November 20, 2014
Unhappy creditors are challenging a federal judge's approval of Tribune Co.'s plan to emerge from bankruptcy, asking that it be put on hold until their appeals are heard.
Separate appeals were filed late Monday by Aurelius Capital Management, a hedge fund that has spearheaded opposition to Tribune's reorganization plan, and other creditors.
Aurelius claims U.S. bankruptcy judge Kevin Carey erred in approving the linchpin of Tribune's reorganization plan — a settlement of legal claims against banks that financed the company's 2007 leveraged buyout and also against investors who subsequently bought the LBO debt hoping to profit.
The media conglomerate sought bankruptcy protection less than a year after the $8 billion buyout, led by billionaire Sam Zell, left it saddled with $13 billion in debt.
Tribune, which was founded in 1847, publishes several major newspapers in the U.S., including the Los Angeles Times, The Baltimore Sun and the Chicago Tribune. It also owns WGN in Chicago and 22 other television stations, as well as the WGN radio station.
Aurelius argues that the legal settlement is unreasonable because noteholders holding some $2 billion in Tribune debt stand to recover very little under the settlement, while being barred from suing the buyout lenders.
Meanwhile, other creditors argue that Carey erred in approving Tribune's plan, because the structure for handling creditor claims unfairly discriminates against senior noteholders.
Both Aurelius and the other creditor group asked that Carey's order approving Tribune's plan be put on hold until their appeals are resolved. The creditors not connected with Aurelius also sought permission to appeal directly to the federal appeals court in Philadelphia, bypassing a federal district court process in Delaware.
Carey scheduled a telephone conference for Wednesday to discuss the motions.
Tribune Co. officials noted that the appeals were expected.
"We think they are without merit, and that Judge Carey's rulings will survive scrutiny throughout the appeals process," Tribune spokesman Gary Weitman said in a prepared statement. "We will respond quickly to assure that the appeals do not interfere with our efforts to emerge from bankruptcy as soon as possible."
Tribune's reorganization plan leaves the Chicago-based media conglomerate in the hands of new owners led by hedge fund Oaktree Capital Management, JPMorgan Chase and Angelo, Gordon & Co., a firm that invests in troubled companies.