The Tribune Co. undertook a two-step reorganization in 2007. In the first step, a newly formed ESOP purchased a portion of Tribune’s outstanding common shares financed by $8 billion of borrowings. In the second step, the remaining common shares were repurchased and Tribune became wholly owned by the ESOP and Tribune borrowed another $2.1 billion. On December 8, 2008, Tribune and certain subsidiaries filed voluntary petitions under Chapter 11 of the U.S. bankruptcy code. JP Morgan (JPM), one of Tribune’s principal lenders, represented by Davis Polk & Wardwell LLP retained Compass Lexecon’s President, Professor Daniel R. Fischel, to analyze Tribune’s solvency at both steps of its reorganization.
After the parties reached a tentative settlement, the court decided to hold a hearing in March 2011 because of objections raised. Two competing reorganization plans were presented at the hearing for confirmation, one supported by JPM and others, and a second supported by holders of certain bonds. Professor Fischel testified at the hearing, concluding that his study demonstrated that Tribune was solvent at both steps of its reorganization. After the hearing and subsequent briefing, Bankruptcy Judge Kevin J. Carey concluded in a lengthy opinion that the plan supported by JPM “should be approved because it is fair, reasonable, and in the best interest of the Debtor’s estates” but did not reach a final decision because of several remaining issues. Judge Carey cited and quoted favorably from Professor Fischel’s testimony in his opinion. We worked with Donald Bernstein, Dennis Glazer, Elliot Moskowitz, Sharon Katz, Lynn Busath, and others at Davis Polk who successfully represented JPM. Professor Fischel was supported by a team in our Chicago office including Rajiv Gokhale, Rahul Sekhar, Avisheh Mohsenin, Robin Stahl, Cliff Ang, Quinn Johnson, and Erika Morris.