(Reuters) - Tribune Co, the owner of the Los Angeles Times and Chicago Tribune newspapers, suffered a legal defeat on Monday after a judge late Monday rejected its plan to end its three-year stay in bankruptcy.
The judge also rejected a competing plan from the company's noteholders and but said the company's plan had stronger creditor backing and could be way out of bankruptcy.
"Neither the (company plan) nor the noteholder plan is confirmable. I am uncertain, at this point, what steps the debtors or other parties may take as a consequence of this decision," wrote Delaware's chief bankruptcy judge, Kevin Carey, in a 126-page opinion.
Carey was charged with deciding a range of legal questions, but the key issue was which plan was legally confirmable and offered the company the best path for repaying creditors and ending its bankruptcy.
Tribune, which also owns more than 20 television stations, filed for bankruptcy in 2008, one year after financier Sam Zell led a $13 billion leveraged buyout of the company.
The bankruptcy wiped out more than a billion dollars of the company's notes and the two bankruptcy plans essentially differed in how they treat legal claims from the buyout.
The company and lenders, led by JPMorgan Chase & Co and hedge funds, proposed a settlement payment of around $500 million to noteholders. Noteholders, led by Aurelius Capital Management LP, an uncompromising hedge fund, rejected that as too cheap and wanted to sue those responsible for the buyout.
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