WILMINGTON, Del. (CN) - After a contentious 2 years and 2 months, opening statements began Monday in the trial phase of the Tribune Co.'s Chapter 11 bankruptcy proceedings, which pits a bankruptcy plan submitted by the foundering media titan against the plan backed by one of Tribune's creditor's, Aurelius Capital Management.
U.S. Bankruptcy Judge Kevin Carey will have to decide between the competing plans. Tribune's submission has the support of senior creditors such as JPMorgan Chase, while Aurelius' plan counts junior bondholders and a securities group known as PHONES among its proponents.
James Sottile, of Zuckerman Spaeder, made the opening statement on behalf of Tribune's official committee of unsecured creditors. Sottile said their plan garnered the most votes and has the support of a majority of the creditors seeking repayment. Also under the proposed Tribune reorganization plan, Sottile said has "wide appeal," creditors will get upfront recoveries without having to depend upon vagaries of litigation.
The alternative plan, by Aurelius, depends heavily on litigating against those who financed and pushed through the leveraged buyout of Tribune in 2007.
Aurelius attorney David Zensky said creditors could garner an additional $1 billion through successful litigation by showing that the deal put through by Sam Zell, JPMorgan Chase and others constituted a fraudulent transfer.
Tribune, owner of the Chicago Tribune, the Los Angeles Times and many other media outlets, filed for bankruptcy protection a year after a heavily leveraged buyout led by real estate mogul Zell sank the company under $13 billion of debt.
Tribune Chairman Zell has endorsed neither plan, because both leave the door open for litigation against him and his business entity, Equity Group Investments.
Zell also claims he is a creditor of Tribune for the $315 million he put up in the 2007 buyout.
Before opening statements were even made, Abid Qureshi, an attorney for Aurelius, took issue with Citigroup, claiming it had withheld evidence involving the solvency analysis of Tribune at the time of the December 2007leveraged buyout.
Andrew Gordon, representing Citigroup, replied by accusing Aurelius of trying to "generate headlines."
Gordon added that "Aurelius has gone to the well 4 times on this issue. There's nothing new here."
Judge Carey ended the day with an open-ended statement that gave both sides something to think about: "You both may be so persuasive that you convince me that both plans are confirmable, then if you do I will be required to select one that should be confirmed. But consider this: You both may be so effective in your objections that you convince me either is confirmable. What then?"
The trial is scheduled to last for 10 days.
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