(Reuters) – Two of Tribune Co’s (TRBCQ.PK: Quote, Profile, Research, Stock Buzz) major creditors joined forces to propose an alternative reorganization plan for the troubled newspaper publisher on Friday, saying it could speed up its exit from bankruptcy by putting aside some legal claims for now.
The proposal from Oaktree Capital Management LP and Angelo, Gordon & Co — outlined in court filings and which the Tribune called the “next best alternative” — is the latest wrinkle in a troubled bankruptcy process.
Tribune Co — home to the Chicago Tribune and the Los Angeles Times — and its creditors are scheduled to take part in a mediation next week to try and agree on a blueprint to emerge from bankruptcy.
In a message to employees Friday which the company publicly released, Tribune said it is “hopeful” mediation will be successful. However, Friday’s proposal may provide the “next best alternative” should mediation fail to produce a plan that rallies creditor support, Tribune told its employees.
The Tribune Co’s bankruptcy restructuring has unraveled after an investigation into the $8 billion leveraged buyout led by Chicago financier Sam Zell in 2007. The bankruptcy has become mired in a battle among creditors over who is to blame for the company’s failure.
Oaktree and Angelo, Gordon & Co presented their plan “in the event that the upcoming mediation does not produce a fully-consensual resolution to these cases,” according to court documents.
Their proposal is designed to provide a mechanism to litigate more complex claims surrounding the buyout, without delaying Tribune’s exit from bankruptcy, according to the court filing.
Under their proposal, structurally subordinated Tribune creditors will receive an interest in a litigation trust, which will then pursue claims found viable by a bankruptcy investigator.
The case is In Re Tribune Co, U.S. Bankruptcy Court, District of Delaware, No. 08-13141.
(Reporting by Dan Levine; Editing by Richard Chang)