The judge overseeing Tribune Co.'s bankruptcy proceedings is warning that he might not approve either of two rival reorganization plans and instead may appoint a trustee to resolve the case.
Naming a trustee could cause months of further delay as the appointee got up to speed. With that in mind, U.S. Bankruptcy Judge Kevin Carey implored the opposing factions of creditors in the 27-month-old case to try again to reach a settlement.
The judge made his remarks after two weeks of complex testimony on the competing proposals to restructure the media company, whose properties include the Los Angeles Times, the Chicago Tribune and KTLA-TV Channel 5.
"The parties are stuck," Carey said in court Friday in Wilmington, Del. "We're in the middle of a multi-constituent … melee."
Each side had a chance during the recent hearings, which began March 7, to present its plan for how to resolve legal claims stemming from Tribune's ill-fated 2007 leveraged buyout led by Chicago real estate magnate Sam Zell.
At the center of the case are assertions made by holders of bonds issued before the buyout that the two-step deal left the company insolvent from the start. Based on those allegations, this group of so-called junior bondholders, led by investment firm Aurelius Capital Management, says it should get $1.9 billion when Tribune leaves Chapter 11.
A group of senior creditors, disputing the substance and amount of those claims, has offered the junior bondholders $500 million. The senior creditors are led by JPMorgan Chase & Co. and investment firms Oaktree Capital Management and Angelo, Gordon & Co.
The hearings are scheduled to wrap up the week of April 11.