Judge Again Denies Junior Creditors’ Appeal in Tribune Bankruptcy Case

The hedge fund leading the junior creditors must now pay $1.5 billion or lose its stake in Tribune to the senior creditors

A federal judge again denied an appeal by the leading junior creditor in the Tribune Company's bankruptcy case to stay for six months a court decision without paying a $1.5 billion bond.

Aurelius Capital Management, a New York-based hedge fund, tried to appeal an Aug. 27 decision to deny the proposed stay, which was struck down a second time Monday as "moot," according to court documents obtained by TheWrap.

"Appellant's emergency motion for stay of the bond order is dismissed as moot," the decision by the Third Circuit Court of Appeals read. "The motion to strike Appellant's Reply is denied."

Aurelius must now must cough up the money or its stake in the bankrupt company will be handed to the senior creditors in the reorganization plan, U.S. Bankruptcy Judge Kevin Carey ruled on Aug. 27.  Aurelius now has 14 days to seek review of the Third Circuit's denial.

In July, Carey approved the plan that will bring Tribune out of Chapter 11 bankruptcy after more than three-and-a-half years.

The requirement of a bond is common in bankruptcy cases to protect creditors from losing money if the company is devalued during the course of the restructuring.

Tribune owns a vast number of media properties, including the Los Angeles Times, KTLA, the Chicago Tribune and the Baltimore Sun.

Pamela Chelin contributed to this report.