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Bankruptcy judge rejects competing reorganization plans in Tribune Co. case
WILMINGTON, Del. (AP) ' A federal judge on Monday rejected Tribune Co.'s plan to emerge from bankruptcy protection along with a rival plan from dissident creditors.
Judge Kevin Carey said in a 126-page ruling that he may appoint a trustee to help end the 3-year-old case if the company cannot come up with an acceptable plan.
Tribune declined comment Monday, saying it was still reviewing the decision.
Tribune owns the Chicago Tribune, the Los Angeles Times, other major newspapers and more than 20 television and radio stations, including WGN in Chicago. It sought bankruptcy protection in 2008, less than a year after a leveraged buyout led by billionaire Sam Zell left the company saddled in debt. A court-appointed examiner concluded last year that the final steps of the buyout probably constituted fraud.
Tribune Co.'s reorganization plan included a settlement shielding the buyout lenders from lawsuits while allowing claims against others involved in the buyout, including Zell and other Tribune Co. officers and directors.
The plan would have given ownership of Tribune Co. to a group led by JPMorgan Chase, distressed debt specialist Angelo, Gordon & Co. and hedge fund Oaktree Capital Management. In exchange, lenders would have forgiven most of the company's debt, which totaled about $13 billion when it sought bankruptcy protection.
The plan, which valued the company at about $6.75 billion, called for creditors not involved in the buyout to receive about $488 million, or roughly 33 cents on the dollar.
A group of creditors led by hedge fund Aurelius Capital Management argued that JPMorgan and other lenders that financed the buyout were well aware of Tribune Co.'s shaky financial situation in 2007 and were escaping legal liability too easily under Tribune's plan.
That creditor group submitted a competing plan calling for smaller upfront guarantees to creditors in hopes of eventually recovering billions of dollars through lawsuits against the buyout lenders and others. Carey said he couldn't accept this plan either. Stephen Sigmund, a spokesman for Aurelius, had no immediate comment.