The Tribune Co has proposed a Chapter 11 bankruptcy exit plan that is being blasted by lenders as "unfair.'
In a filing in the U.S. bankruptcy court in Wilmington, Delaware, holders of more than $3.6 billion of claims under a 2007 secured credit agreement called Tribune's April 8 announcement that it had reached an accord with creditors "premature and misleading."
Tribune had said the agreement purports to settle all potential claims from the company's $8.2 billion leveraged buyout in 2007 led by real estate developer Sam Zell. It said the plan would help it to emerge from bankruptcy this year.
Zell and his group of creditors are now demanding that they be allowed to propose an alternative Chapter 11 bankruptcy exit plan that will consider their interests. This group of creditors has accused the Tribune Co of using the bankruptcy exit plan to transfer assets to a group of "insiders" while discriminating against unsecured lenders who were fraudulently bilked of billions during the 2007 leveraged buyout.
For those who have not followed the Tribune case, a group of unsecured lenders are accusing the Tribune Co of engaging in the 2007 leveraged buyout knowing that the deal would drive the company into bankruptcy and then using bankruptcy to enrich a group of "inside" lenders.
"This is a 'settlement' made possible with 'other people's money' -- specifically, that of the credit agreement lenders and other current holders of credit agreement claims left holding the bag," the lenders said.
If the Tribune Co and this group of unsecured creditors are unable to come to some type of agreement, we may see protracted litigation.