| WILMINGTON, Delaware
WILMINGTON, Delaware Leave it to a hedge fund named for a philosophical Roman emperor to try to turn a contentious corporate bankruptcy into a campaign for decency and morality.
Mark Brodsky, chairman of Aurelius Capital Management, is at the center of a fight over how creditors in the long-running Tribune Co bankruptcy case will be repaid. A trial was starting on Monday, with Brodsky pushing to have a trust set up to pursue potential legal claims over the publisher's leveraged buyout, rather than settle many claims as the company prefers.
The distressed debt investor and former bankruptcy attorney has become a feared presence in Chapter 11 tussles, with his eye for detail and penchant for combing through complex documents governing bonds and loans.
Distressed investors such as Aurelius can play a critical role in bankruptcies by scooping up large parts of a company's debt, bringing in lawyers and battling for their payout.
Brodsky, 57, has challenged the reorganizations of Lyondell Chemical Corp and Citadel Broadcasting Corp. He is currently campaigning to have $20 billion of bank debt of Energy Future Holdings, formerly known as TXU, declared in default.
Brodsky, who declined to be interviewed, launched his fund in 2005 and named it for Marcus Aurelius, the Stoic emperor of ancient Rome and author of Meditations. The fund manages about $2.8 billion.
"We at Aurelius believe in the rule of law," Brodsky wrote in a letter to Tribune's creditors seeking their support. "We believe wrongdoers should be held accountable rather than rewarded; and we have decided to make a stand."
Brodsky also sought to sway creditors with a quote from British philosopher Edmund Burke: "The only thing necessary for the triumph of evil is for good men to do nothing."
There is little mention in his letter of his plan being a way to extract more money for bondholders. People who have fought against him say he likes to go to court for the sake of grinding down opponents and bolstering his reputation.
Aurelius is well known in bankruptcy cases, but otherwise keeps a low profile. According to one person who has visited the hedge fund's Manhattan office, it has a conference room decorated with a large calendar featuring the decade-long timeline of the Iridium bankruptcy, which Brodsky was involved with when he worked at hedge fund Elliott Advisors.
"It's funny how nerdy they are for distressed stuff," said this person, who asked not to be identified because of a business relationship with the fund. "They are distressed and nothing but distressed."
In the Tribune case, Delaware Bankruptcy Judge Kevin Carey is weighing two plans for repaying creditors, one backed by Aurelius and one backed by the company and its lenders.
Brodsky wants to create a trust that would pursue all potential claims against billionaire developer Sam Zell, who orchestrated Tribune's buyout, plus bankers and others. Any money the trust collects would be distributed to creditors.
The company argues that only some claims should be pursued and its plan would get bondholders some payment much quicker.
Some of the legal claims that Brodsky hopes to pursue in the Tribune case are rarely litigated in large bankruptcies.
"They are incredibly expensive and often ugly and uncertain and so it's usually quite rational to settle," said Jonathan Lipson, a professor at the University of Wisconsin Law School.
Brodsky does not shy away from fights. At Elliott Advisors, he accused a judge in the Owens Corning bankruptcy of conflicts of interest. He went to an appeals court to get him removed.
His fund was the final hold-out to restructure Dubai World's debt, eventually selling its holdings rather than joining the 99 percent of creditors who approved the plan. He also held up AbitibiBowater's exit from bankruptcy, eventually forcing the company to leave a subsidiary in Chapter 11 to carry on its legal battles with Aurelius.
The fund has suffered its share of losses and it is also defending itself against insider trading accusations in the Washington Mutual bankruptcy. An individual investor, Nate Thoma, said Aurelius traded the financial company's securities while negotiating its bankruptcy settlement plan.
The Tribune case is sure to put Brodsky in the spotlight again. He could be called as a witness. If he testifies, he may try to rouse the same passion used in his letter to creditors, which quotes his fund's namesake.
"If expecting nothing and fearing nothing, you are content to act with nature and to speak with heroic honesty -- then you will live well. And no power on earth can stop you."
(Reporting by Tom Hals; editing by Martha Graybow and Andre Grenon)