After more than three years, U.S. Bankruptcy judge Kevin Carey has officially signed off on a plan for Tribune Company to emerge from bankruptcy. According to the Chicago Tribune, the media company will soon be in the hands of a conglomerate of senior investors, led by the LA-based investment fund Oaktree Capital Management.

Looks like we won’t have old Sam Zell to pick on anymore…Or won’t we? Apparently, the Tribune Co. legal fireworks aren’t over yet.

From the Chicago Tribune:

Junior creditors led by New York investment fund Aurelius Capital Management have said they plan to appeal the decision issued in Delaware by U.S. Bankruptcy Judge Kevin Carey. But few experts expect appeals to gain traction because of the careful way Carey fashioned his confirmation opinion.

Instead, junior creditors will likely shift their attention a federal district court in New York where they are suing 35,000 former Tribune Co. shareholders who cashed out in the company’s 2007 leveraged buyout, certain current and former Tribune Co. directors and officers as well as Sam Zell, the deal’s architect. The litigation could keep the controversy surrounding the litigation alive in the courts for years.

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Not sure if this is a score for the little guys, or just a big FU to the big guy, but either way we feel pretty good about it. U.S. Bankruptcy Judge Kevin Carey ruled this week that Sam Zell is officially last on the Tribune Company’s list of creditors as it emerges from Chapter 11 status–behind $759 million worth of claims from other holders of “Phones” notes.

From the Wall Street Journal:

Mr. Zell put only $315 million of his own money at risk in the deal. In recent litigation, his investment venture attempted to get equal footing with other low-ranking creditors when it comes to sharing recovery, on the basis of a claim for $225 million. The attempt failed.

Judge Carey’s conclusions, issued Monday in the U.S. Bankruptcy Court in Wilmington, Del., set the stage for a June 7 effort by the media company to win confirmation of a Chapter 11 plan and get out of bankruptcy after more than three years.

Couldn’t have happened to a nicer guy. Too bad someone couldn’t have put Zell in his place before he destroyed one of the most important media empires in America.

The Tribune Company, (abusive) parent company of the LA Times, has spent $212.9 million on lawyers fees and another $17.8 million on additional legal expenses since they filed for bankruptcy in December of 2008, according to a report in Crain’s.

And the river of wasted money isn’t drying up anytime soon. U.S. bankruptcy judge Kevin Carey recently said he wouldn’t hold hearings to end Tribune Co’s bankruptcy until May, at the earliest. Which, sadly, will most likely mean more layoffs, despite the company’s supposedly improving cash flow.

Tribune Company’s protracted bankruptcy isn’t going to be resolved anytime soon. U.S. Bankruptcy Judge Kevin Carey said in a ruling yesterday that he wouldn’t hold hearings to end the case until May at the earliest. Some apparent good news, however, did come out of Carey’s ruling yesterday.

From the LA Times:

In his order, Carey reversed part of a ruling he made in October that seemed to give an advantage to a deeply subordinated class of note holders known as the Phones.

At the time, Carey indicated that the Phones class should be able to recover at least part of a claim with a face value of $1.2 billion, getting its share from money that would otherwise go to Aurelius and other junior creditors.

That opened the door to a parallel demand from Tribune Chairman Sam Zell, whose affiliate owns a similar note. It was Zell who acquired the company in a highly leveraged buyout in December 2007, a deal that landed it in bankruptcy a year later.

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With all the powerful interests elbowing over every dollar in the Tribune Company bankruptcy case, the one guy we were sure wasn’t going to get a dime back was Sam Zell–given that his leveraged buyout of Tribune is almost universally acknowledged to be the cause of the company’s collapse. I mean, is there a single human being out there, other than Zell, who believes the real estate magnate is entitled to anything?

Well, apparently there is–and that human being is bankruptcy judge Kevin Carey.

From the Chicago Tribune:

In a long-awaited opinion delivered Oct. 31, Carey surprised everyone involved in the case by saying that holders of a deeply subordinated class of notes known as PHONES were being treated unfairly and should be able to recover at least a slice of a claim with an original value of more than $1 billion.

Carey didn’t mention Zell’s $225 million claim, which stems from his failed 2007 leveraged buyout of Tribune Co., but sources said the judge’s logic regarding PHONES provides an opening for Zell’s lawyers to argue that he, too, should be eligible to collect a partial return because the two securities share similar legal language.

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Tribune Company bankruptcy judge Kevin Carey signed off on the company’s plan to dole out $42.5 million in bonuses to around 640 people in management.

“I think it’s entirely reasonable to order this relief in these uncertain times,” Carey said during a hearing for the plan earlier today.

Truer words have never been spoken. We can’t even begin to comprehend what would happen if management felt a slight pinch during these troubling economic times. God forbid! Pillars would crumble! The heavens would fall! The demon soul of Karl Marx himself would descend from the sky and rape every virgin in sight!

Carey has now authorized more than $134 million in management bonuses since Tribune Co. filed for bankruptcy in 2008. We can’t even begin to count how many thousands of journalists and print workers have been laid off during that same time.

After more than two years of backroom negotiations, the Tribune Company bankruptcy case finally got underway in court yesterday. Bankruptcy judge Kevin Carey is now faced with choosing between two rival plans. One, backed by the Tribune Company, would essentially shift the company’s debt, and assets, into the hands of lenders like JPMorgan Chase. The other, backed by Aurelius Capital Management, would take a more aggressive stance toward getting funds from those who pushed Tribune Company‘s leveraged buyout–namely Sam Zell. (Zell isn’t a fan of either plan, apparently, because both leave the option open to sue him and his company Equity Group Investments.)

However, during yesterday’s opening statements, Carey let everyone know that after two years of negotiations, he still retained the option to reject both plans.

“What then?” he asked rhetorically, not allowing either side a response.

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The New York Post is reporting that by midnight tonight, a group of Tribune Company lenders are expected to sue Sam Zell for his role in the leveraged buyout of that company, which precipitated its collapse.

More from the Post:

Lawyers representing Sam Zell in the Tribune Company‘s bankruptcy case have asked Judge Kevin Carey to warn creditors not to sue him–or “they’ll lose.”

The Wall Street Journal‘s Peg Brickley explains in semi-legalese:

Zell’s request is couched as an objection to the reports creditors will see when they get their ballots to vote on the four competing reorganization proposals for the newspaper publisher and broadcaster. Before the ballots go out, Judge Kevin Carey must find the materials describing the various Chapter 11 plans to the voters contain “adequate information.”

Zell’s objection says it’s not adequate to tell creditors that Tribune’s banks and bondholders and trade creditors all want to sue him. It will only be adequate to tell them that if they sue, they will lose, in the opinion of Zell’s attorneys.

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