Back to Drawing Board|for Tribune & Creditors

WILMINGTON, Del. (CN) - The federal judge sorting out Tribune Co.'s 3-year-old bankruptcy case denied a pair of competing reorganization plans for the Chicago-based media giant.

In the 126-page ruling handed down Monday, Judge Kevin Carey wrote that neither submitted plan is confirmable under current U.S. Bankruptcy rules. And, "if a viable exit strategy does not present itself with alacrity, the court intends to consider, on its own motion, whether a chapter 11 trustee should be appointed," Carey wrote.

The two submitted plans represent warring factions of creditors, one led by Tribune Co. and the other led by Aurelius Capital Management.

Although both plans were rejected, Carey said in the ruling that Tribune's plan "is feasible" because it "treats creditors fairly" in the settlement of claims.

Carey also highlighted the overwhelming preference for Tribune's plan in the voting results by creditors. In fact, Aurelius garnered just three classes of votes, two coming from the Aurelius group and one from "a single creditor holding a claim of $47."

Tribune officials are taking that part of the ruling as a silver lining, revising their plan for consideration in the upcoming status hearing on Nov. 22.

Part of that revision may hinge on a provision of Tribune's plan that protects company employees who sold stock in the 2007 buyout of the company. Tribune may have to drop that contentious element for the plan to pass muster.

Tribune filed for bankruptcy in 2008, just a year after Sam Zell led the 2007 leveraged buyout that left it nearly $13 billion in debt. Tribune owns several major newspapers such as the Chicago Tribune and Los Angeles Times, as well as television and radio stations.

Aurelius' plan gives creditors the ability to sue the lenders and beneficiaries of the leveraged buyout through a litigation trust, but they must accept less money up front with the hope of getting more through lawsuits. Carey called that tack "risky."

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