Top Creditors File|New Plan for Tribune

WILMINGTON, Del. (CN) - Two senior creditors of the Tribune Co. on Friday submitted an alternative plan of reorganization for the embattled media giant. Oaktree Capital Management and Angelo, Gordon & Co., once at odds with each other, have now forged a partnership and a plan for Tribune to exit bankruptcy proceedings.

There are two main tenets to the plan: Tribune will be allowed to exit bankruptcy in short order, which will "maximize the value of the Estates for all creditors," and certain claims related to the leveraged buyout will be transferred to a litigation trust for post-confirmation litigation. But only those claims that were found by independent examiner Ken Klee to have a 50 percent or better prospect of success will be allowed to proceed.

The reorganization plan is conditioned upon failure of mediation proceedings that are to begin this week. Mediation will be presided over by U.S. Bankruptcy Judge Kevin Gross, who was appointed by Judge Kevin Carey in August, after the investigation by Klee revealed potential liabilities relating to Tribune's 2007 leveraged buyout by billionaire Sam Zell.

Prior to the senior creditors' reorganization filing, the Tribune's unsecured creditors committee -- which includes JPMorgan Chase, Deutsche Bank Trust Company and the Washington-Baltimore Newspaper Guild -- filed a motion seeking the right to sue Zell and others for the 2007 leveraged buyout.

They seek derivative standing and authority to assert claims through an adversary proceeding against Tribune, but only if the scheduled mediation effort fails. The claims must get approval before a looming two-year deadline imposed by Tribune's initial bankruptcy filing on Dec. 8, 2008.

The Examiner Report issued in late July helped bolster the committee's own fraud investigation into the leveraged buyout. The new claims include breach of fiduciary duty, aiding and abetting, professional malpractice and unjust enrichment.

The committee wants to "remedy the wrongs committed by eight groups of defendants in connection with the [leveraged buyout] Transaction." Those groups include Tribune and its subsidiaries' boards of directors and officers who guaranteed certain indebtedness by the company during the transaction, several of Tribune's largest shareholders, Sam Zell and his affiliated entities and Valuation Research Corp., which provided solvency opinions in connection with the buyout.

The proposed complaint also cites shareholder transfers made within two years of the leveraged buyout transaction date. Additionally, the unsecured creditors seek to void cash bonuses, phantom stock awards and other non-salary payments and transfers received by the directors and officers of Tribune related to the buyout.

The motion was filed by attorneys for Chadbourne & Parke LLP and Landis Rath & Cobb LLP.

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