U.S. Bankruptcy Judge Kevin Carey signed an order providing certain key parties access to the full examiner’s report in the Tribune Co. bankruptcy case so they can evaluate its momentous conclusions before an Aug. 6 voting deadline.
He also indicated he might move the deadline out by a few days, but said he was determined not to disrupt the schedule for confirmation hearings on the Tribune Co. plan which are slated to begin Aug. 30.
Carey stopped short of ordering full public disclosure of the report. But he indicated he would prefer to make it public if parties in the case can resolve a series of confidentiality disputes raised by several big lenders to Tribune Co.’s ill-fated 2007 leveraged buyout, which was led by Chicago real estate magnate Sam Zell.
Testimony from those lenders at a hearing in U.S. Bankruptcy Court in Delaware Thursday indicated the remaining issues may be resolved by early next week, likely clearing the way for public disclosure.
When the examiner, Los Angeles lawyer Kenneth Klee, issued the report on Monday, he complained that confidentiality disputes raised by lenders to the LBO forced him to redact all of the factual findings supporting his conclusions about whether the Zell LBO left Tribune Co. insolvent as soon as it closed, as several junior creditor groups have contested.
A settlement of those charges among Tribune Co. and several of its key creditors formed the basis of the company’s reorganization plan, which is currently up for vote by the current Aug. 6 deadline.
But when Klee filed his redacted report, it contained a summary of conclusions showing that he believed the second half of the LBO was, indeed, a case of “fraudulent conveyance,” the technical term for the junior creditor’s claim. He also indicated that Tribune Co. management may have acted dishonestly and misled the board in 2007 so it would approve a transaction that was doomed from the start.
Several opponents to the plan filed motions calling on Carey to extend the voting deadline so creditors could have a chance to see a full version of the report and analyze his claims before casting their votes.
James Johnston, an attorney with Hennigan, Bennett & Dorman in Los Angeles, which represents a large group of senior creditors opposed to the settlement plan, said the plan asks creditors to indemnify managers “that the examiner has found to be in breach of their fiduciary duty” and many others from all claims stemming from the LBO.
“Right now, it is impossible for any creditor to assess the facts,” said Johnston, whose group is led by Oaktree Capital Management, a Los Angeles hedge fund that specializes in distressed bond investing.
In response to the arguments of Johnston and others, Carey indicated he might extend the deadline by a few days past Aug. 6 but said the danger in doing so is that it might mean Tribune Co., which owns the Chicago Tribune, the Los Angeles Times and other media properties, would exhaust its legal period of exclusivity to propose a plan of reorganization. That might open the case up to other plans that might further delay the company’s emergence from Chapter 11 proceedings.
Consequently, Carey said he might be willing to move the voting deadline but not the confirmation hearings.
