Tribune mediation talks break down again

Mediation talks broke down once again in the Tribune Co. bankruptcy case this week, sending rival creditor groups back to their corners to prepare competing restructuring plans for the media conglomerate.

People close to the situation, who declined to be identified because of the sensitive nature of the ongoing negotiations, said that at least three groups including aggressive hedge fund Aurelius Capital Management were prepared to file separate plans outlining opposing formulas for resolving the 22-month-old case. This would set the stage for a renewed battle over splitting up the company’s value.

Tribune owns the Los Angeles Times, Chicago Tribune, KTLA-TV Channel 5 and other media outlets.

Although a court-ordered mediator has yet to abandon the effort to find a friendly settlement, the adversaries remain deeply divided, these people said, suggesting the messy case promises to get messier as the sides hunker down for a fight.

“It’s kind of a free-for-all right now,” said one person in the middle of the fray. “Some parties have really dug in their heels.”

A spokesman for Tribune declined to comment.

It won’t help matters, people on all sides of the case said, that the New York Times published a front-page story Wednesday that was highly critical of Tribune Chief Executive Randy Michaels and the culture his team has created at the company.

Although Michaels issued a blanket denial of the newspaper article’s characterization of Tribune’s work environment as a hostile and sexist “frat house,” people close to the bankruptcy case predicted creditor groups looking to discredit management will almost certainly seize on it as ammunition.

“Someone is going to make something of it,” said one experienced bankruptcy attorney in the case. “Why not? You never know what impact it will have with the human being in the robe.”

The story follows news last month that the senior creditors who will end up owning the company already have been talking with possible replacements for the company’s leadership. One potential candidate, Michael Eisner, the former chief executive of Walt Disney Co., has since said he’s not interested.

mdoneal@tribune.com