(Reuters) - Tribune Co, the bankrupt publisher of the Chicago Tribune and Los Angeles Times, moved closer to ending its three-year bankruptcy after a judge resolved lingering disputes about the order in which noteholders should be repaid.
Monday’s ruling by Delaware Bankruptcy Judge Kevin Carey also found that the company’s proposed plan to emerge from bankruptcy does not unfairly discriminate against certain creditors.
That could blunt one line of attack against the company’s bankruptcy plan, which could once again come under fire from noteholders when Carey is asked to approve it at a June 7 hearing.
“This puts us on a flight path to successful emergence,” said David LeMay, an attorney with Chadbourne & Parke LLP, which represents the unsecured creditors committee in the bankruptcy.
Carey’s 50-page opinion determined the order of repayment among the company’s unsecured noteholders, an issue he left unresolved in key rulings last year because he wanted more evidence.
He found that senior noteholders will be repaid ahead of securities known as Phones, which he determined had a claim of $759.3 million. Carey determined that last in line are the EGI Notes, which are held by financier Sam Zell.
Carey also rejected an argument that it amounted to unfair discrimination to divide some of the repayments under the plan evenly between senior noteholders and others, such as trade claims and retirement claims.
In 2007, Zell led a $13 billion leveraged buyout of Tribune, which also owns 23 television stations, a cable network and several other large newspapers. In 2008, the company filed for bankruptcy, and noteholders have blamed Zell and the buyout for their losses.
Last year, Carey rejected two rival reorganization plans — one from noteholders and one backed by the company, the unsecured creditors committee and investors in Tribune’s loans.
Following his Monday ruling, Carey will hold a hearing to approve the documents that will be sent to creditors so they can analyze and vote on the latest plan. Even if creditors and Carey approve the plan, Tribune could linger in bankruptcy for many months until it can get clearance from the Federal Communications Commission.
The company’s latest plan turns over ownership to holders of its loans, a group that is led by JPMorgan Chase & Co (JPM.N) and hedge funds including Oaktree Capital Management LP and Angelo, Gordon & Co.
The plan also provides about $500 million in a settlement with its noteholders. It will also allow noteholders to pursue legal claims against those who benefited from the Zell-led buyout but who did not contribute to the settlement, such as former shareholders who sold in 2007.
Lawsuits have been filed against former shareholders but have been stayed pending the resolution of the bankruptcy.
The case is In re Tribune Co, U.S. Bankruptcy Court, District of Delaware, No. 08-13141.
Reporting By Tom Hals; editing by John Wallace