Aug 19 (Reuters) - A federal appeals court on Wednesday refused to undo a central component of Tribune Co’s bankruptcy plan in a defeat for prominent hedge fund Aurelius Capital Management LP, which claimed it was short-changed by the reorganization.
By a 3-0 vote, the 3rd U.S. Circuit Court of Appeals in Philadelphia said letting Aurelius, a specialist in distressed debt, pursue an appeal related to more than $2.2 billion of bankruptcy claims would be unfair to Tribune and to creditors who overwhelmingly approved the media company’s Chapter 11 plan.
Circuit Judge Thomas Ambro said those parties deserve “finality” after Tribune’s emergence from bankruptcy in December 2012, while Aurelius did not deserve “by judicial fiat what it could not achieve by consensus within Chapter 11.”
Aurelius spokesman Brian Schaffer declined to comment.
Tribune filed for Chapter 11 in December 2008, a year after billionaire Sam Zell acquired the Chicago-based company in a leveraged buyout that boosted its debt load to roughly $13 billion from $5 billion.
Under the reorganization, Aurelius and some other creditors split only $369 million on their $2.24 billion of claims.
Aurelius believed the payout was too low, but a federal bankruptcy judge in July 2012 confirmed Tribune’s reorganization plan over the New York-based hedge fund’s objection.
The judge put his confirmation order on hold so Aurelius could appeal, provided that it post a $1.5 billion bond, a condition Aurelius resisted.
It was not until June 2014 that a federal judge dismissed Aurelius’ claim. Wednesday’s decision upheld that dismissal, without ruling on the claim’s merits.
Aurelius owned $2 billion of pre-LBO debt, and it is unclear what the hedge fund paid for it, the appeals court said.
The 3rd Circuit separately revived claims by two bond trustees seeking to recoup $30 million from various Tribune creditors, saying that request would not jeopardize the reorganization plan.
Tribune emerged from Chapter 11 with a clean balance sheet and new ownership.
It has since split into Tribune Media Co, which owns broadcasting and digital media assets such as the WGN superstation, and Tribune Publishing Co, which owns newspapers such as the Chicago Tribune and Los Angeles Times.
Tribune Media spokesman Gary Weitman declined to comment.
The case is In re: Tribune Media Co, 3rd U.S. Circuit Court of Appeals, Nos. 14-3332 and 14-3333. (Reporting by Jonathan Stempel in New York; Editing by Dan Grebler)