The Los Angeles Times building. L.A. billionaire Eli Broad is once against interested in buying the struggling newspaper.
Yep, it could be Broad versus Brodsky for the future of the L.A. Times, which is currently embroiled in the never-ending Tribune Co. bankruptcy. The L.A. billionaire philanthropist against the bankruptcy lawyer turned hedge-fund CEO.
Brodsky's Aurelius Capital Management, based in New York, is fighting hard for its piece of Tribune's liabilities, basically forcing the company's senior creditors, including Oaktree Capital Management, to delay their hopes that they could get the viable parts of the media giant out of Chapter 11, leaving the junior creditors to tussle over the scraps. But Brodsky doesn't play that game, and he's no stranger to pressing his case and pressing it hard.
This can create some controversy. During the bankruptcy of what was left of Washington Mutual after the FDIC sold its banking business to JP Morgan Chase in 2008, Aurelius was accused by a single shareholder of insider trading because the hedge fund, along with three others, wouldn't back a reorganization plan. However, the bankruptcy judge eventually decided to "vacate" a ruling that would have enabled the shareholders to sue the hedge funds, effectively erasing the accusation from the legal record.
Anyway, I wrote about the Tribune bankruptcy and Aurelius' role in it back in January:
When Tribune finally exits bankruptcy, Oaktree will exchange its debt for equity — an ownership stake — in the new company. To do this, they want Tribune's bondholders to effectively take a $500 million payoff, then fight it out in court over whatever is left of the "bad" company while a "good" company can emerge from Chapter 11.
That's the plan that the "senior creditors," as they're called, have proposed. But the "junior creditors" — guided by Aurelius Capital Management, an aggressive, New York hedge fund — aren't interested in taking the deal. They want to fight over every penny in court. This is from HFMWeek:[Aurelius]...is leading a group of dissident bondholders who claim that the lenders that financed a recent buy-out that saddled Tribune Co with over $12 [billion] in debts, are escaping legal liability too easily.
“We at Aurelius believe in the rule of law,” [Aurelius founder Mark] Brodsky reportedly wrote in a letter to Tribune’s creditors. “We believe wrongdoers should be held accountable rather than rewarded; and we have decided to make a stand.”
The fund has a somewhat fearsome reputation in the industry, with one professional at a restructuring practice reportedly stating: “Aurelius is like the Terminator – they just keep coming and coming and coming.”
Broad and fellow billionaire Ron Burkle failed to wrest the L.A. Times away from Tribune, pre-bankruptcy, in 2007, losing out to eventual winner Sam Zell, who bought Tribune with a mountain of debt. It's likely that, once Tribune does exit Chapter 11, Broad will enjoy a much, much lower purchase price, so in the grand scheme of things he might wind up with more money to put into the paper and its digital transformation. They'd certainly be dancing among the cubicles on Spring St. — however many journalists are left, that is.
Tribune's senior creditors have to see this as an urgent signal that the company needs to wrap up its bankruptcy in a hurry, lest Broad sour on the idea of owning an enterprise that still prints the news with ink on paper. And for Mark "The Terminator" Brodsky, that's blood in the water — something that may mean that he gets his way, as Aurelius has in the past.
Update: Aurelius contacted me about the insider-trading accusation and clarified the legal situation. From what I can tell, it was basically a bankruptcy court gambit on the part of a single shareholder that wanted an initial plan of reorganzation to go through. I've corrected the post accordingly.