Signaling that infighting among creditors is bogging down reorganization efforts, Tribune Co. has asked a U.S. Bankruptcy Court in Delaware to give its management team until March 31 to craft a plan to exit Chapter 11 without interference from other parties.
If all goes according to plan and the court agrees to extend management's "exclusivity" -- scheduled to expire at the end of this month -- Tribune will emerge from bankruptcy by May 31, 2010, according to court papers it filed Friday.
The Chicago-based media company, whose holdings include the Los Angeles Times and KTLA-TV Channel 5, is trying to avoid a lengthy and costly legal battle with some creditors, who are likely to recoup little of their investment in the company given the distressed values of its newspaper and television assets.
A dissident bondholder group has accused Tribune and its senior lenders of hiding "millions of dollars" worth of fees from the court and is conducting an investigation of the $8.2-billion leveraged buyout that gave real estate mogul Sam Zell control of the company.
In a separate filing Friday, Tribune asked the court to hold a status conference Dec. 1 that would bring warring creditor factions together before the court to lay the groundwork for a resolution to the battle.
The dispute centers on whether the deal structured by Zell's team and lenders including JPMorgan Chase & Co. and Merrill Lynch to take the company private in 2007 represented "fraudulent conveyance," on grounds that the debt-heavy transaction left the company insolvent from Day 1.
Led by trustee Law Debenture Trust Co., the bondholders seek to invalidate more than $10 billion in claims held by the financial institutions that financed the deal. That would leave Tribune's bankruptcy estate to be divided among junior creditors.
A Tribune spokesman declined to comment on the filings and the legal dispute. But in a recent TV interview, Zell dismissed the fraudulent-conveyance argument as false.
Even so, it has proved a costly distraction to the media company.
Since spring, more than 30 entities and people involved with the leveraged Employee Stock Ownership Plan transaction have responded to "numerous" requests for documents from the creditors, Tribune said in court filings. The company said it had conducted its own review and analysis of "hundreds of thousands of pages of internal Tribune documents" as well as "tens of thousands of documents produced by third parties who participated in the transactions."
Tribune said in the filings that it aimed to bring a review of the deal to a speedy conclusion and that a status conference should further that goal.
Tribune also said that it intended to file a reorganization plan with the court by March 31 and that it would prefer to have the support of major creditors, but it could also create a framework for resolving "any remaining issues" after it emerges from bankruptcy.