Reporting from Chicago —
The judge in Tribune Co.'s stalemated bankruptcy case appointed a mediator Wednesday, hoping an independent third party could finally broker peace between the Chicago-based media company and its pugnacious creditors.
The move comes after a company-sponsored reorganization plan unraveled several weeks ago in the wake of an independent examiner's report that criticized elements of Tribune Co.'s disastrous 2007 leveraged buyout. Efforts to find a new compromise have collapsed amid escalating bickering over legal claims tied to the buyout led by Tribune Co. Chairman Sam Zell.
At Tribune's request, U.S. Bankruptcy Judge Kevin J. Carey in Delaware called for a nonbinding mediation process led by his colleague U.S. Bankruptcy Judge Kevin Gross, which was to begin immediately.
There is no set timetable for the process, but each of the parties in the case will have until mid-September to provide Gross with a five-page plan it thinks provides a fair settlement of the legal issues surrounding the 2007 buyout.
Tribune owns the Los Angeles Times, KTLA-TV Channel 5, the Chicago Tribune and other media properties.
Carey's order set places at a crowded negotiating table for Tribune; the unsecured creditors committee; JPMorgan Chase (as agent for the senior lenders to the buyout); hedge fund Angelo, Gordon & Co.; a group of senior lenders led by hedge fund Oaktree Capital Management; a new group of senior lenders represented by New York law firm Olshan Grundman Frome Rosenzweig & Wolosky; owners of the bridge loan debt represented by Wells Fargo Bank; junior creditors led by Law Debenture Trust Co., Centerbridge Credit Advisors and Deutsche Bank Trust Co.; a legal entity controlled by Zell; and a group of junior debt holders led by Wilmington Trust Co.
As a nonbinding mediation, participation is voluntary. Gross will have the power to set the rules and the agenda. He also will be allowed to consult with Kenneth Klee, the Los Angeles lawyer who was the independent examiner in the case.
Klee's report, issued in late July, is what torpedoed Tribune's reorganization plan. The report partially supported junior creditor claims at the center of the case that Zell's 2007 buyout left Tribune insolvent. Any settlement brokered by Gross will hinge on an agreement to resolve those claims.