The independent examiner charged with investigating claims of “fraudulent conveyance” in the Tribune Co. bankruptcy case asked Wednesday for a 15-day extension for filing his report.
That would likely delay a set of confirmation hearings in the case scheduled for Aug. 16 in the U.S. Bankruptcy Court in Delaware.
“The examiner’s request…is not unexpected,” Tribune Co. said in a statement. “Although it may delay our confirmation hearing for a short period of time, we are supportive of the request in the interest of enabling the examiner to do a thorough and complete review.”
The examiner, Kenneth Klee, was appointed on April 30 and asked to evaluate charges brought by junior bondholders in the case that Tribune Co.’s 2007 leveraged buyout was a case of fraudulent conveyance, meaning it left the Chicago-based media conglomerate insolvent from Day One.
Those charges and millions of pages of documents obtained through the discovery process have been central to the case because, if proven, they raised the specter that U.S. Bankruptcy Judge Kevin Carey could disallow more than $10 billion in claims held by senior creditors and open the architects of the deal — including Tribune Chairman Sam Zell — to charges of breach of fiduciary duty.
In a court motion Wednesday, Klee blamed his request for more time on “the enormity of the documentary record that had to be reviewed.” Based on what he has found so far, he added, his team will need to do more witness interviews than previously expected. The original deadline for the report was July 12 but Klee asked for an extension to July 27.
Tribune Co. and a number of its important creditor constituencies have already forged a settlement of the charges that gives 91.2 percent of Tribune Co. to senior creditors and 7.4 percent to some junior creditors. That compromise formed the basis of the company’s reorganization plan, which is currently out for vote, with confirmation hearings scheduled for mid-August.
Opponents of the plan among both senior and junior creditors, however, have said the examiner’s report will provide creditors key information for evaluating whether the settlement is a fair one. Consequently, if the examiner’s motion was delayed, the vote deadline would likely be delayed, pushing out the entire calendar. For how long was unclear.
One group of senior creditors with a little more than $2 billion in claims has said the settlement is too generous to the junior group. A group of junior bondholders representing $1.2 billion in claims that were excluded from the settlement have argued just the opposite. Both have said they are confident Klee’s report will support their claims.
Tribune Co. owns the Chicago Tribune, WGN Ch-9, the Los Angeles Times and other media properties.
