Bloomberg News

Tribune Creditors Allowed to Seek Consolidation of Lawsuits

June 28, 2011

(Updates with comment from judge about competing reorganization plans in fifth paragraph.)

June 28 (Bloomberg) -- Tribune Co.’s noteholders, represented by Deutsche Bank AG, won permission to try to consolidate dozens of lawsuits against the newspaper publisher’s former shareholders into a single case.

U.S. Bankruptcy Judge Kevin J. Carey in Wilmington, Delaware, gave a Deutsche Bank unit permission to attempt to consolidate the cases under a federal rule that puts lawsuits in scattered jurisdictions under the administration of a single federal judge. The process makes one judge responsible for most of the pre-trial disputes over evidence and other issues that are routine in a lawsuit.

Earlier this month, a unit of Frankfurt-based Deutsche Bank sued dozens of shareholders, brokers and other defendants in at least 11 states on behalf of Tribune’s pre-buyout noteholders. Those creditors and others in the lawsuit are owed at least $2.5 billion that can’t be repaid in full because of a 2007 leveraged buyout, Deutsche Bank Trust Co. Americas said.

Carey yesterday heard final arguments of two groups of Tribune creditors who are divided over whether to sue or settle with JPMorgan Chase & Co. and the other lenders behind the $8.3 billion in loans that paid for the media company’s shareholder buyout.

At the end of today’s hearing, Carey repeated a message he has given to the two sides before: keep trying to settle.

‘Continue Your Discussions’

“You still have good reasons to continue your discussions,” Carey said. He also said that he will begin working on a decision about which plan, if any, he would approve “right away.”

Tribune, based in Chicago, has proposed a plan that is sponsored by JPMorgan Chase & Co. and two hedge funds, Angelo Gordon & Co. and Oaktree Capital Management LP. Their plan would also raise money for creditors partly through lawsuits, while settling most claims against the buyout lenders, including New York-based JPMorgan.

The dozens of shareholder lawsuits filed by Deutsche Bank and other creditors are part of the strategy devised by Aurelius Capital Management LP, which owns Tribune notes issued before the buyout. The New York-based hedge fund proposed a reorganization plan that would use lawsuits against shareholders, the lenders that funded the buyout and others to collect what pre-buyout creditors are owed.

The bankruptcy case is In re Tribune Co., 08-bk-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).

--Editors: Glenn Holdcraft, Fred Strasser

To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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