Tribune Co. and some of its creditors asked a federal judge on Monday to approve a plan that would let the company emerge from more than two years under bankruptcy protection.
A separate group of creditors are opposing the plan. Those creditors want the judge to approve a competing reorganization plan.
Judge Kevin Carey heard several hours of closing arguments but did not say when he would rule on either plan.
Tribune Co., which owns the Chicago Tribune, the Los Angeles Times, other major newspapers and more than 20 television and radio stations, filed for bankruptcy protection in December 2008. That came less than a year after real estate developer Sam Zell engineered a buyout of the company.
The company's effort to exit bankruptcy protection bogged down last summer after a court-appointed examiner concluded that the final steps of the buyout probably constituted fraud.
Tribune Co.'s reorganization plan includes a settlement that would shield the buyout lenders from lawsuits but would allow claims against others involved in the buyout, including Zell and other Tribune Co. officers and directors. It would leave the company in the hands of an ownership group led by JPMorgan Chase, distressed debt specialist Angelo, Gordon & Co. and hedge fund Oaktree Capital Management in exchange for forgiving most of the company's debt.
Tribune Co.'s plan, which values the company at about $6.75 billion, calls for creditors that weren't involved in the buyout to receive $488 million, roughly 33 cents on the dollar.
But a group of creditors led by Aurelius Capital Management argue that JPMorgan and other lenders that financed the buyout are escaping legal liability too easily. Their plan would provide smaller up-front guarantees to creditors in hopes of eventually recovering billions of dollars through lawsuits.
They argued Monday that the lenders were well aware of Tribune Co.'s shaky financial situation in 2007.
David Zensky, an attorney for the creditors opposed to Tribune Co.'s plan, also said the fairness of the settlement was questionable because the negotiations excluded his group.
James Sottile, an attorney for Tribune's committee of unsecured creditors, which backs Tribune Co.'s plan, said Monday that it is highly unlikely that the Aurelius-led creditors would be successful enough in future litigation to get more money than they would under Tribune Co.'s plan. He told Carey that the settlement is reasonable and consistent with the conclusions of the court-appointed examiner.
"The evidence shows that the settlement is a fair compromise of complex, hotly disputed issues," Sottile said.