The judge's extension gives Tribune Co. more time to try to bring senior… (M. Spencer Green / Associated…)
Wilmington, Del. — A U.S. Bankruptcy Court judge Tuesday extended until Feb. 28 Tribune Co.'s exclusive right to file a reorganization plan in its year-old Chapter 11 case.
The decision heads off -- at least for now -- a challenge to that exclusivity by a group of senior creditors who had sought to seize control of the case by requesting the right to file a plan of their own.
Tribune Co., whose holdings include the Los Angeles Times and KTLA-TV Channel 5, had asked for an extension until March 31, but in a nod to creditor concerns, Judge Kevin Carey clipped the request by a month and set a date in mid-February for a hearing to revisit the issue.
"It doesn't seem to me that [Tribune] has been in court too long without offering a plan," Carey said in denying the objection brought by a group of prominent investment funds. They own $4.4 billion of the $8.6 billion in senior debt Tribune Co. Chairman Sam Zell used to take the Chicago-based media company private in 2007.
The extension gives Tribune Co. more time to try to forge a compromise between senior creditors in the case and an increasingly militant group of junior creditors led by distressed-bond investor Centerbridge Partners.
But Tuesday's hearing made plain that those negotiations will be a challenge, given the deepening divisions between the various parties and even some splintering among factions.
Toward the end of the hearing, which was the first time all the main combatants in the case had met in one room, Carey acknowledged the growing tension in the case.
"It appears to me that everyone is beginning to stake out their positions," Carey said. "That either leads to agreement or war."
Tribune attorney James Conlan said the company has already forged a complete reorganization plan that hands over majority ownership of the media conglomerate to its senior lenders and the other holders of its senior debt. The plan swaps the media conglomerate's suffocating $13 billion in debt for a new capitalization structure that is mostly equity with a new, more manageable level of debt.
The key outstanding challenge, he said, is to determine what percentage of the equity the senior creditors get and what percentage goes to the junior creditors. Negotiations will be aimed at forging a compromise on the issue.
The negotiations will pivot on how much leverage Centerbridge and other owners of $1.26 billion in junior bonds can get from their charges that those who took part in the 2007 Zell deal knew it was doomed from the start.