Tribune Co., citing “vigorous negotiations” toward a new settlement with its creditors, asked the judge in its bankruptcy case for more time to work out a reorganization plan that “would maximize consensus” around a deal.
The move comes as the various bickering parties in the case realign their positions based on the findings contained in an independent examiner’s report studying claims surrounding the Chicago media conglomerate’s 2007 leveraged buyout.
That report, issued late last month, suggested that the $8.2 billion LBO orchestrated by Chicago real estate magnate Sam Zell may have rendered the company insolvent from Day 1, lending support to various creditors’ arguments.
Initially, that caused U.S. Bankruptcy Judge Kevin J. Carey at a hearing Aug. 3 to extend deadlines for voting and confirmation hearings in the 20-month-old case, pushing its possible resolution from the end of this month into October.
But in a motion filed late last week, Tribune Co., which owns the Chicago Tribune, said that it would be “imprudent” to hew to those new deadlines, which would require creditors to vote on the plan by this Friday. The reason, a source said, was that negotiations may lead to an altered settlement with different terms that would require more study by the creditors expected to vote on them.
Tribune Co. didn’t ask for a specific new schedule, leaving it to the court’s discretion. Carey will consider the motion at a hearing in Delaware late Tuesday afternoon.
Another recent filing in the case, however, seemed to indicate that arriving at a full consensus will still be a challenge. The filing came Aug. 10 from an entity formed by Zell in 2007 to invest in Tribune Co., which has a leftover deeply-subordinated claim against the company for $250 million.
The Zell claim was rendered worthless in the original plan along with another subordinated class known as the PHONES debt. But the filing warned that Zell would fight any arrangement stemming from new negotiations that paid the PHONES creditors, who hold around $1.2 billion in debt, ahead of the Zell entity.
In a complex legal argument, the Zell entity claimed the PHONES debt is subordinated to the Zell claim. An attorney for Wilmington Trust Co., the agent for the PHONES debt, couldn’t be reached for comment.