Tribune bankruptcy gets messier

There's no telling what happens to the media giant at this point. A proposed settlement that had been nursed along by Tribune (parent of the LAT and KTLA) has fallen apart, and that means other parties in the bankruptcy will be able to propose their own reorganization plans, a process that could easily drag out well into next year. Tribune, too, intends to file a reorganization plan in a week or so. "The debtor has tried mightily to bring the parties together," said Tribune attorney James Conlan. "That hasn't happened." To give you an idea of how absurd this process has gotten, Tribune may now consider suing one of its biggest creditors, JP Morgan, which up until a few days ago had been considered a supporter - and possibly one of the new owners. JPMorgan has apparently backed out of the original settlement proposal. From Reuters:

Bondholders have claimed the buyout amounted to a "fraudulent transfer" that piled the company with unsustainable new debt and potentially wiped out their investment. They have threatened a legal fight to remove the buyout lenders, including JPMorgan Chase & Co, from the front of the line for repayment. Tribune had a plan earlier this year to settle those legal issues, but that was undone by an examiner's report last month which emboldened bondholders, who are near the back of the line for a payout.

It's worth noting that the biggest holdout to the original settlement is a large group of senior creditors led by L.A.-based Oaktree Capital Management. The group claims that it's getting shafted in favor of the junior creditors - and that former Tribune CEO Sam Zell is contributing zilch. Of course, the warring factions might still come together and work out a compromise. But it certainly doesn't look promising.