Tribune Co. warns of more bankruptcy delays

By Michael Oneal
Posted July 26, 2010 at 4:24 p.m.

Tribune Co. warned Monday that its nearly 20-month-old bankruptcy proceeding could be delayed again over a brewing dispute involving the release of a court-appointed examiner’s report in the case.

The report, which is being prepared by Los Angeles lawyer Kenneth Klee, is due before midnight Monday. But in a filing Friday, Klee said wrangling with various parties over the confidentiality of documents attached to his report would force him to submit a heavily redacted version, pending a judge’s ruling on the issue.That news prompted a filing from Tribune Co. Monday asking the court to authorize the disclosure of the entire report to all the interested parties in the case. If not, the filing said, those parties would not be able to prepare their responses to the report in time for confirmation hearings in the case scheduled to begin Aug. 30, likely prompting requests for an extension.

“Any delay in this regard could be highly disruptive to the plan confirmation schedule,” the filing said.

Klee subsequently made another filing Monday saying he could accept the Tribune Co. plan but argued that the report should be made available to the public at large, not just interested parties.

At issue is a highly-anticipated report from Klee, who was appointed April 30  to evaluate allegations by junior bondholders that the company’s 2007 leveraged buyout was a case of fraudulent conveyance, meaning it left the company insolvent from Day 1.

Those charges raise the specter that more than $10 billion in claims against the estate held by senior lenders to the LBO could be disallowed and that the architects of the deal — including Tribune Co. Chairman Sam Zell — could be open to accusations of breach of fiduciary duty.

Tribune Co. and several of its key junior and senior creditor groups have signed an agreement settling the claims that would pay junior creditors more than $400 million.

But other creditors, most notably a group of senior bondholders led by Los Angeles hedge fund Oaktree Capital Group, have opposed the settlement and hope Klee’s report will provide an independent assessment of how strong the fraudulent conveyance claims are and whether they justify the terms of the proposed settlement.

In his filing Friday, Klee said he was ready to file his report but that a number of parties in the case think various documents he used to reach his conclusions should remain confidential. He said that he has been hampered from the beginning of his investigation by “confidential” and “highly confidential” designations attached to documents “that verge on the absurd.”

He said he has asked various parties to be more reasonable. But because they have insisted on maintaining so many “confidential” designations, Klee said he would not be able to file a full report with exhibits without court approval.

Tribune Co. responded by asking the court to break the logjam so as not to disrupt a schedule it hopes will lead to the confirmation of its proposed reorganization plan later this year.

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One comment:

  1. jack (me) July 26, 2010 at 3:30 pm

    As I mentioned earlier today, not to mention the Tribune’s assertion of the First Amendment right to publish the details of this deal involving it.