Junior creditors block Tribune rescue plan

They'll need to post $1.5 bil bond to appeal revamp

Tribune’s quest to emerge from bankruptcy continues elusive as junior creditors sought to block a reorganization plan that a judge approved last month.

Judge Kevin Carey of U.S. bankruptcy court in Delaware has given junior creditors until next Wednesday to come up with a $1.5 billion bond that would allow them to appeal the revamp, which is set to place the big TV and newspaper group in the hands of senior creditors. The bankruptcy process has been dragging on for nearly four years, and an appeal would further delay a resolution for up to two years.

It’s not clear whether the junior creditors, led by Aurelius Capital Management, would choose to post a bond for such a hefty amount; if they decline to post the bond, Tribune would proceed with seeking approval from regulators to transfer broadcast licenses to its new owners.

Tribune filed for bankruptcy in December 2008 after a disastrous $8 billion leveraged buyout the year before by Sam Zell. The process has cost hundreds of million of dollars so far and put the Chicago media company in limbo. CEO Eddy Hartenstein warned of its effects.

“It’s an insidious drip-by-drip, day-by-day erosion and diminution of our brand and of our place competitively in the market,” he said in testimony Friday, according to new reports.