Lenders battle in court over billions of debt after US newspaper group failure

The future of two of the most prestigious newspapers in the US is being debated in a Delaware bankruptcy court this week, but there is still no sign of an end to the legal wrangling over the controversial leveraged buy-out deal that landed them there over two years ago.

The December 2008 bankruptcy of the Tribune Group, owner of the Chicago Tribune and the Los Angeles Times, has spawned recriminations among staff, executives and a slew of lenders who are fighting over how best to restructure the ailing business.

The bankruptcy judge Kevin Carey yesterday began hearings on two competing restructuring plans: one backed by the Tribune Group and the financiers of the 2007 buyout led by the property magnate Sam Zell; the other proposed by the holders of older debts, who say that Mr Zell and his coterie are responsible for the company's insolvency and should surrender much more of their financial interest in Tribune's future.

Mr Zell, a Chicago billionaire nicknamed "the Gravedancer" for his habit of buying apparently moribund assets and turning them around, won control of the 160-year-old Tribune Group in April 2007. This was at the peak of the bubble in credit markets and, bankrolled by a consortium of lenders led by JPMorgan Chase, he loaded the company up with $13bn of debt, a sum that raised eyebrows even then. Barely a year and a half later, as a deep recession exacerbated declines in newspaper advertising revenues, the company filed for Chapter 11 bankruptcy protection.

Tribune's board – over the objections of Mr Zell, who remains chairman – is supporting a financial restructuring that would give JPMorgan and other holders of the buyout debt a combination of new loans and equity in a post-bankruptcy company. It would also require holders of earlier-dated debt to drop their lawsuit against the buyout lenders, which alleges that they were responsible for the insolvency.

The holders of that earlier debt are led by Aurelius Capital Management and Wilmington Trust, who say they are owed $2.5bn and would lose the majority of that under the Tribune plan.

Last summer, a court-appointed examiner determined that the 2007 buyout involved "dishonesty and lack of candour" on the part of Tribune's then management, and that the deal rendered the media group insolvent from the moment the two-step transaction closed. The examiner said it was likely Aurelius would win its $1.6bn lawsuit against JPMorgan and others.

Even if Judge Carey backs the official Tribune-JPMorgan proposals, the legal battle over the company is set to continue. Aurelius is also suing Mr Zell personally, and other members of the past and current executive teams, alleging misconduct during the buyout.

Arts and Entertainment
Friends is celebrating its 20th anniversary this year
tvSeries celebrates 20th anniversary
Sport
Yaya Touré (left) and Bayern Munich’s Spanish defender Juan Bernat
footballToure's lack of defensive work is big problem for City
Voices
voicesApple continually kill off smaller app developers, and that's no good for anyone
Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

PROMOTED VIDEO
Sport
Wembley Stadium
footballNews follows deal with Germany
Arts and Entertainment
A spell in the sun: Emma Stone and Colin Firth star in ‘Magic in the Moonlight’
filmReview: Magic In The Moonlight
Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
life

News
ScienceGallery: Otherwise known as 'the best damn photos of space you'll see till 2015'
Life and Style
fashion

Bomber jacket worn by Mary Berry sells out within an hour

Sport
Andros Townsend is challenged by Vladimir Volkov
football
Arts and Entertainment
Rapper Jay Z performs on the Pyramid Stage at Glastonbury in 2008
musicSinger sued over use of the single-syllable sample in 'Run This Town'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Audit Manager Central Functions

To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...

Credit Risk Audit Manager

Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week