November 2nd, 2011 by Reed Allmand 
U.S. Bankruptcy Judge Kevin Carey has rejected two competing plans for reorganizing Tribune Co. calling the plans infeasible and threatening to appoint a trustee to resolve the disputes if the fighting parties cannot come to an agreement. For the last three years Tribune Co. has been in Chapter 11 bankruptcy unable to exit because of litigation surrounding a 2007 leveraged buyout which some creditors contend was fraudulent. The two rejected bankruptcy plans aimed to resolve the buyout dispute; but the bankruptcy judge didn’t agree with the terms presented.
The senior creditors’ plan, which was also supported by the Official Committee of Unsecured Creditors, sought to settle the charges by paying Aurelius and the other junior bondholders $431 million for their nearly $1.3 billion in claims. Aurelius countered that it could recover much more through litigation and proposed a plan centered on a “litigation trust,” which would allow the company to emerge from bankruptcy while the fraudulent conveyance charges were fought out in court.
The proposed bankruptcy plan backed by Tribune Co. attempted to protect creditors and employees from liability related to the buyout; but the bankruptcy judge said that was not acceptable. If the Tribune wants to win approval for their bankruptcy plan, they will need to remove the “shield” clause which protects creditors and employees involved in the buyout from future litigation
The Tribune Co. bankruptcy is unusual in the sense that it has dragged on so long. Most Chapter 11 bankruptcy cases resolve quickly allowing the company to reconstitute itself and move on with a fresh start. When cases like this drag on it can become damaging to the company scaring off investors and employees. If this case goes on much longer it could cause irreparable damage to Tribune. Because the bankruptcy judge in this case understands what’s at risk, he has made it clear he is more than willing to appoint a trustee who will push the company through the process.
About Reed Allmand
Allmand's vision is rooted in his own financially precarious childhood in Abilene "My father always had difficulty holding a job and supporting our family, so after my parents divorced when I was 12, my sister and I got jobs to help make ends meet," he recalls. "I remember what it felt like as a child to worry that our car would be repossessed or home foreclosed on."
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