Judge picks mediator to resolve Tribune Co. court fight

The judge overseeing Tribune Co.'s bankruptcy appointed a mediator to help resolve allegations that part of the newspaper publisher's 2007 buyout was a fraudulent transfer that harmed low-ranking creditors.

U.S. Bankruptcy Judge Kevin Carey appointed Kevin Gross, a fellow judge in Wilmington, Delaware, to referee a dispute that intensified in July after a court-ordered report found lower- ranking creditors were "somewhat likely" to win a lawsuit challenging part of the $8 billion buyout.

The participating creditors, including hedge funds and Wall Street banks, must tell Gross how much Tribune owes them as well as short positions or swaps they hold, Carey said in the order. Such disclosures have been fought in the past by creditors who say it gives away their proprietary trading strategy.

Carey also required the creditors and the company to give Gross a five-page position paper laying out the terms they would accept in a new reorganization plan. All documents involved in the mediation, as well as any discussions among the parties, must be kept confidential, Carey said.

Chicago-based Tribune's original plan lost the support of lenders and a group of bondholders following the release of the buyout report.

Parties in MediationThe parties involved in the mediation are JPMorgan Chase Bank NA, agent for some senior lenders behind the buyout, hedge fund Angelo Gordon Co., two groups of buyout lenders that include various hedge funds, Centerbridge Credit Advisors LLC, Aurelius Capital Management LP, EGI-TRB LLC and Wilmington Trust Co., the agent for low-ranking noteholders who have sued over the buyout.Fighting among the creditors, who are owed more than $12 billion, intensified after July 27 when bankruptcy examiner Kenneth N. Klee released a report that bolstered the position of lower-ranking creditors. Those creditors, including noteholders owed $1.2 billion, say JPMorgan and the other buyout lenders should lose their position as first-to-be-paid because of the 2007 transaction.Lower-ranking creditors say the buyout was a fraudulent transfer because it added $8 billion in debt on Tribune without benefitting the company and the banks who loaned the money.Some lenders have said in court papers that they oppose compromising with the lower-ranking creditors.Tribune filed for bankruptcy in December 2008, a year after the buyout led by real-estate billionaire Sam Zell.The company's current reorganization plan asks creditors to give up their right to sue insiders, including Zell, and the lenders who financed the buyout over claims they left the company insolvent.Tribune owns the Los Angeles Times, the Chicago Tribune and broadcasting stations in Los Angeles and other U.S. markets, as well as stakes in cable channels.The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).