A group of lenders to bankrupt Tribune Co. withdrew its reorganization plan for the media company, leaving creditors with three other options when they begin voting on how to end the 2-year-old Chapter 11 case.
Pursuing the plan “was not the best focus of our resources,” said Evan Flaschen, an attorney representing the group, made up of 14 hedge funds, including GreyWolf Capital Management and billionaire George Soros’ Soros Fund Management.
Flaschen, of the law firm Bracewell & Giuliani, told a hearing in Delaware’s bankruptcy court Wednesday that the decision to withdraw the plan Tuesday night was unilateral.
“Was there a secret deal? There was none,” he said.
Tribune, which owns the Los Angeles Times, Chicago Tribune and Baltimore Sun newspapers as well as about 20 broadcasters, filed for bankruptcy in 2008.
The company entered into court protection less than a year after real estate developer Sam Zell completed his two-step buyout of Tribune with $8 billion of debt.
The company and its creditors have spent two years fighting over who is to blame for the bankruptcy, which will likely wipe out billions of dollars of investments.
Delaware Bankruptcy Court Judge Kevin Carey cleared the way this month for creditors to vote on four plans to reorganize the company and bring it out of Chapter 11. In the vast majority of bankruptcies, creditors vote on just one plan.
A Tribune attorney said at Wednesday’s hearing that he did not know of any other parties that were considering withdrawing their plans.
He said the voting on the three remaining plans might be delayed for a few days while documents are amended. The voting could start as soon as next week.
Flaschen said the hedge fund group, which has called itself the Step One Lenders, was still evaluating its best course of action. He did not say whether the group, which said in court papers filed in October that it held $768 million of Tribune debt, would be participating further in the bankruptcy.
The various reorganization plans differ in their approach to pursuing legal action stemming from the bankruptcy and in how they parse ownership among creditors.
The Step One Lenders said in their amended plan filed last week that their approach was faithful to the findings of the court-appointed examiner. The examiner found that a court would likely determine the second part of Zell’s buyout was an “intentional fraudulent conveyance.”
That finding indicated the billions of dollars of debt used in that part of the deal might be knocked to the back of the line for repayment. In addition, the fees paid on those loans and the shareholders who sold into the second part of the buyout could be forced to surrender some of what they received.
The Step One Lenders proposed pursuing that litigation, in contrast to the company’s plan, which proposed settling it.
The company declined to comment.
The case is In re Tribune Co., U.S. Bankruptcy Court, District of Delaware, No. 08-13141.
