Extend Tribune's Bankruptcy Control? Not So Fast, Say Lenders

By: Mark Fitzgerald As the first anniversary of Tribune Co.'s filing for bankruptcy approaches, the case is only getting more complex.

In a flurry of filings late Tuesday, senior creditors challenged Tribune management's request for yet another extension of its exclusive right to propose a reorganization plan for the Chicago media giant and proposed their own work-out for the bankruptcy, while subordinated creditors claimed to see more evidence for their allegations that the company's debt-larded going-private deal in December 2007 was a "fraudulent conveyance," a legal term meaning the transaction was insolvent from the day it was consummated.

In one filing, senior lender JPMorgan Chase urges the bankruptcy court to put its foot down about further delays: "With the first anniversary of the [bankruptcy] petition date approaching and the statutory limit for extensions of the debtors exclusive period just over six months away, it is time for the parties, who have been provided with more than enough information to permit them to decide how to proceed with regard to the transactions, to move forward without further delay. A four-month extension of debtors exclusive period to file a plan of reorganization will serve no purpose; an imminent termination of that period may spur movement."

JPMorgan Chase attorneys noted that Tribune management had provided more than 480,000 pages of documents, including extensive documents to Law Debenture Trust Company of New York, the firm that is assisting junior creditors in its case alleging a fraudulent conveyance.

If the junior creditors could prove fraudulent conveyance, the $8.6 billion asset claim could be stripped from senior lenders, leaving more for junior, or subordinated, creditors to split up. The junior creditors have previously complained in court documents that Tribune's reorganization plan would leave them with just a "sliver" of assets, while rewarding senior lenders.

Also Tuesday, a group of lenders who own more than half of the $8.6 billion in debt that was used to engineer the going-private transaction asked to propose its own reorganization plan to the court.

These lenders would want to form a holding company, controlled by senior lenders, of the operating subsidiaries of Tribune, such as the Chicago Tribune newspaper, the WGN-TV superstation and its other broadcast and print properties.

This group said in a filing that it had proposed this plan to Tribune management, but there has been "no progress" in reaching an agreement.

A hearing on the various extension and reorganization plan requests is scheduled for Dec. 1.