CORRECTED – Tribune creditors propose revised bankruptcy plan

* Plan changes amount to be held in litigation trust

* Plan amended after judge warns of deadlock
(Corrects second, seventh and eighth paragraphs to clarify
only equity amount being revised)

By Dena Aubin

NEW YORK, March 28 (Reuters) – Tribune Co bondholders led
by hedge fund Aurelius Capital Management on Monday filed a
revised bankruptcy reorganization plan for the media company,
hoping to overcome objections by senior creditors.

The revised plan calls for less equity to be set aside to
address litigation stemming from Tribune’s $8.2 billion
leveraged buyout in 2007, which was led by real estate
developer Sam Zell.

Some senior creditors had complained that too much of the
equity in a reorganized Tribune would be tied up while the
litigation, which could last for years, proceeds.

Tribune owns newspapers including the Chicago Tribune and
Los Angeles Times, and has other media properties including the
WGN television superstation. It filed for Chapter 11 protection
from creditors in December 2008.

U.S. Bankruptcy Judge Kevin Carey this month described
Tribune’s bankruptcy case as deadlocked, as the two creditor
groups remained unable to agree on how to split the company’s
assets, according to the Chicago Tribune.

Tribune has backed a reorganization proposed by senior
creditors led by JPMorgan Chase & Co, Oaktree Capital
Management and Angelo, Gordon & Co. Bondholders including
Aurelius oppose this plan.

The senior lenders had argued that the bondholders’ plan
would hold the company and many smaller creditors hostage to
years of court battles, the Tribune said.

Under the bondholders’ revised plan, about 20 percent to
29.5 percent of Tribune’s equity value would be held in the
litigation trust, down from about 50 percent to 65.4 percent in
their earlier plan.

The company backs the senior lenders’ plan under which
competing claims would be settled by the bankruptcy court,
avoiding future litigation.

Senior lenders that financed the leveraged buyout would
compensate bondholders and other unsecured creditors for some
of their losses and control the company when it exits
bankruptcy.

Carey had said on March 7 he might reject both proposals.
For details click on [ID:nN07166786].

James Sottile, a Zuckerman Spaeder lawyer who has argued
for the senior creditor group’s plan, was not immediately
available for comment.

The case is In re Tribune Co, U.S. Bankruptcy Court,
District of Delaware, No 08-13141.
(Reporting by Dena Aubin; Additional reporting by Jonathan
Stempel)

CORRECTED – Tribune creditors propose revised bankruptcy plan