UPDATE: Judge Kevin Carey has issued his opinion. Oaktree, Angelo Gordon & Co., and JPMorgan Chase will now be able move toward assuming full ownership of Tribune's assets, under an accepted plan of reorganization. But Aurelius will fight on. This is from the Chicago Tribune:
Even if Tribune Co. emerges from bankruptcy in short order, the legacy of the Zell deal is likely to live on in the courts for years to come. Under the plan Carey approved, a group of junior creditors led by New York hedge fund Aurelius Capital Management will receive payments of $431 million to settle legal claims related to the buyout, including charges that the deal left the company insolvent from the start.
I reached out to Aurelius' Mark Brodsky for comment, but I haven't heard anything yet.
The lengthy bankruptcy of the Tribune Co. — it filed in December of 2008 — could be drawing to a close. There have been reports all this week that Judge Kevin Carey will okay a restructuring plan that will end a drawn-out battle between the senior and junior creditors of the company that owns the Los Angeles Times.
This is from the Chicago Tribune (also owned by Tribune Co.):
Though Carey didn't say so specifically, he strongly hinted that he would rule in favor of a restructuring plan proposed by the company, the Official Committee of Unsecured Creditors and a trio of senior creditors: Oaktree Capital Management; Angelo, Gordon & Co.; and JPMorgan Chase.
A favorable decision would start the emergence process and allow Tribune Co. to move forward with a crucial effort to win Federal Communications Commission approval to transfer its broadcast TV and radio station licenses to a new ownership group led by Oaktree and the other senior creditors. The company's emergence from bankruptcy court is contingent on winning FCC approval.
This hasn't been an inexpensive process. The Financial Times reported in June that legal teams have raked in $230 million during the proceedings. There's also been a running battle between the senior creditor group and a group of junior creditors, led by Mark Brodsky's Aurelius Capital Management.
The FT's Nicolle Bullock explained in June how this has been playing out, and she got what I believe is the only public comment Brodsky has made since Tribune entered Chapter 11. Aurelius has opposed what would be the probable outcome if Carey's opinion approves the senior creditors' ownership of Tribune's assets, while relegating Aurelius' disputes to separate litigation:
Mark Brodsky of Aurelius Capital, told the FT: “The Tribune decision in October inadvertently rewarded the cynics and created a troubling new road map for LBO bankruptcies. From now on, management and LBO lenders will have little incentive to negotiate with the true economic parties [my emphasis] on the other side of the table. The architects of the disaster will dodge accountability, and LBOs that don’t deserve to be done will continue to get done.”
Brodsky does somewhat have history on his side in the Tribune case. Sam Zell himself called it "the deal from hell." The question is whether Brodsky is truly acting as a disciplinary figure here, sending signals to future buyout players that they'd better do the right thing — not load up companies with new debt when buying them, as Zell did — or spend years dealing with him in bankruptcy court; or preparing to admit that Aurelius didn't win the battles it wanted to, this time around. His comment about "true economic parties" suggests that he considers Aurelius' bonds to hold more weight than the buyout debt that Zell took on.
I've been in contact with representatives of Aurelius to obtain more insight into this story and will update if an opinion emerges today.