Judge Rejects Tribune Co.'s Reorganization Plans
By Chuck Sudo in News on Nov 1, 2011 3:40PM
The three-year struggle for Tribune Co. to come out of bankruptcy will go on for a while longer after U.S. Bankruptcy Judge Kevin Carey rejected two competing plans for the company to reorganize.
In a 126-page opinion that starts with Carey quoting the parable of The Scorpion and the Fox (see below), Carey said he couldn't confirm either plan with the bankruptcy code and said he would appoint a trustee to settle things if Tribune and its litany of creditors cannot some to a resolution. From Carey's opinion.
“[Tribune Co.] must promptly find an exit door to this Chapter 11 proceeding. The court is equally resolute that, if a viable exit strategy does not present itself with alacrity, and despite any disruption to management, as well as the added cost and delay this might inevitably occasion, the court intends to consider, on its own motion, whether a Chapter 11 trustee should be appointed.”
Sam Zell called his 2007 purchase of Tribune Co. a "deal from Hell" at the time. The $8.2 billion dollar deal was heavily leveraged: Zell only brought $315 million of his own money to the table. A memo Zell sent to Tribune Co. employees at the time read, “I’ve said repeatedly that no matter what happens in this transaction, my lifestyle won’t change. Yours, on the other hand, could change dramatically if we get this right.”
He wasn't lying.