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Tribune Co. to offer new bankruptcy plan

WILMINGTON, Del. — Tribune Co., whose plan to exit bankruptcy was rejected by a judge late Monday, will file a new proposal by Nov. 22, Chief Restructuring Officer Don Liebentritt said Tuesday in a note to employees.

Tribune, owner of The Baltimore Sun, saw its reorganization plan and a competing proposal by a group of lower-ranking creditors rejected by U.S. Bankruptcy Judge Kevin J. Carey. Carey said he approved the central piece of the company’s plan, a settlement with lenders led by JPMorgan Chase & Co.

“We see [Monday] as a delay, not a defeat,” Liebentritt said in the e-mailed note. “We see a path to getting out of bankruptcy, and we don’t have to start from square one.”

The two plans were backed by opposing groups of creditors. JPMorgan and the lenders who funded Tribune’s $8.2 billion buyout in 2007 supported a plan that would absolve them of most legal responsibility for the transaction.

Carey has presided over the case since it was filed in December 2008. Tribune, which is valued at about $6.75 billion, owes creditors about $13 billion, according to court records.

Carey said in a 126-page ruling that he may appoint a trustee to help end the 3-year-old case if the media conglomerate cannot come up with an acceptable plan soon.

In addition to The Sun, 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 loaded with 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 litigation against others, 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 Tribune sought bankruptcy protection.

Tribune’s 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.

The group submitted a competing plan that would have given creditors less money upfront, while preserving their ability to recover more through lawsuits.

But Carey said he couldn’t accept the Aurelius plan, either.

In rejecting both plans, the judge said neither met requirements under bankruptcy law for acceptance by creditors that would be left with less than what they are owed.