Creditors in the Tribune bankruptcy are still waiting for the two-year long Chapter 11 bankruptcy to come to an end. But if the fact that there are four competing bankruptcy plans is any indication of what the future holds, this bankruptcy case won't be coming to an end anytime soon. The bankruptcy judge in the case has already sent back hundreds of pages that describe the four competing bankruptcy plans and won't consider the plans for approval again until December 6th. Even once the bankruptcy plans' language is approved by the bankruptcy judge, all of the creditors will need to vote on the plans so that they can qualify for the opportunity to be confirmed by the bankruptcy judge. Why are there so many bankruptcy plans? Well, there is a heated dispute stemming from a pre-bankruptcy buyout which allegedly plunged the company into bankruptcy.
The situation has arisen from deep divisions over how to deal with legal claims stemming from Zell's buyout and the company's bankruptcy, which wiped out roughly $2 billion of the Tribune bonds that were issued prior to Zell's buyout.
Bondholders will not be paid until the company pays off the billions in loans used to fund Zell's deal. As the loans are worth more than the company, that leaves nothing for the bondholders unless they can prove the loans essentially rendered the company insolvent. If proven, that puts billions of dollars of loan claims at the back of the line for repayment.
Bondholders led by Aurelius Capital Management are fighting to have the loans used to fund Zell's buyout pushed to the back of the line.