WILMINGTON, Del. (CN) – The bankruptcy examiner appointed to investigate the 2007 leveraged buyout of the Tribune Co. has been given a two-week extension to file his report at a recent hearing.
The deadline was originally set for July 14. U.S. Bankruptcy Judge Kevin Carey wanted to “twist the examiner’s arm” to get the report filed by July 23, but relented when examiner Kenneth Klee said conflicting testimonies forced him “to take many of the depositions under oath.”
The parties agreed to a July 26 deadline, at one minute before midnight, and preserved an Aug. 6 deadline for voting on Tribune’s bankruptcy plan.
Tribune’s reorganization plan would value the company’s equity at $4.1 billon and give 91 percent ownership of its media holdings to its senior lenders.
The two-week extension for the examiner’s report shortened the review period to just seven days before the voting deadline on Tribune’s plan.
This prompted attorney James Johnston of Hennigan, Bennett and Dorman to push for a 17-day review period, in anticipation of a report that could be 1,000 pages or more.
Because Tribune’s exclusivity period ends on Aug. 6, competing plans could be submitted between Aug. 6 and Aug. 13, when the proposed review period ends. Johnston, who represents the credit agreement lenders holding $425 million in Tribune debt, told the judge at the July 1 hearing that a competing plan filed in that window would not have any impact on votes.
“Surely the debtor’s plan is not so fragile that it can’t withstand the presence of another plan for a day or two at the end of the balloting deadline, and the bogeyman of chaos, confusion just doesn’t ring true,” he said during the hearing.
Elliot Moskowitz, who represents JPMorgan Chase Bank, challenged the “bogeyman of chaos” view, saying Johnston’s proposal would lead to “much more confusion” so that Tribune’s plan would be voted down.
Judge Carey sided with the majority of creditors and Tribune’s counsel by keeping the Aug. 6 deadline for voting on the reorganization plan.
The independent examiner is investigating possible fraudulent conveyance charges stemming from the leveraged buyout of the company by Sam Zell and a group of senior lenders that left the company insolvent.
A hearing set for Aug. 9 will review Tribune’s 2010 Management Incentive Plan, which could net employees of the company nearly $43 million in bonuses. Tribune Co. described the bonuses as “ordinary course incentive programs” needed to keep employees from being “severely undercompensated.”
Tribune Co., owner of the Los Angeles Times and the Chicago Tribune, has lost nearly $6 billion since the leveraged buyout of the company in 2007.