Bankruptcy for Tribune Gets Hung Up by Squabbles

Eighteen months into bankruptcy, the Tribune Company remains stymied in squabbling over just how the company landed in bankruptcy in the first place.

The ailing media company was taken private in 2007 with an $8.2 billion deal by real-estate investor Sam Zell. Today, the transaction continues to haunt the company, its management and creditors. A group of creditors holding Tribune's bank debt is threatening to upend the newspaper-and-television station owner's plans to exit from bankruptcy later this summer. Separate lender groups are deposing Zell and James B. Lee, a top banker at J.P. Morgan Chase & Co., which backed the buyout. And a court-appointed examiner probing Zell's buyout for possible fraud could give ammunition to creditors of all stripes to battle Tribune's restructuring plans.

The dissident lenders, led by Oaktree Capital Management, are grousing that holders of bank debt are unfairly paying more than $400 million to bondholders, while Mr. Zell and the buyout's original backers contribute nothing. They complain that the settlement at the same time insulates Mr. Zell and his backers from litigation related to the buyout. The dissident lenders have emerged as the most significant hurdle to Tribune's efforts to exit from bankruptcy and start anew. Further litigation by Oaktree and its allies could prolong Tribune's stay in bankruptcy court, depending on their ability to forge a coalition that could vote against the company's restructuring plan.