Creditors fight "wicked" plan for bankrupt Freedom

By Tom Hals

WILMINGTON, Del., Nov 11 (Reuters) - Creditors of bankrupt Freedom Communications Holdings Inc have launched a fight against an "immoral and wicked" reorganization plan that would turn over the Orange County Register owner to JPMorgan Chase & Co (JPM.N) and other banks.

A court-appointed committee of creditors asked the judge overseeing the bankruptcy to direct Freedom, which owns 30 daily papers and eight TV stations, to give it confidential financial information so it could draft an alternative plan.

Freedom's proposed bankruptcy plan would give secured bank lenders almost all of the reorganized company's equity and $325 million in new notes. In return, secured lenders including JPMorgan Chase & Co (JPM.N), SunTrust Banks Inc (STI.N) and Union Bank of California would forgive $770 million in debt. Union Bank is a unit of Mitsubishi UFJ Financial Group Inc (8306.T).

Under the same proposal, unsecured creditors with claims of $300 million were to split only $5 million. The unsecured creditors receive nothing if they voted against the plan.

"I think it's immoral and wicked that we didn't get more consideration than $5 million divided among all the unsecured creditors," said Alan Bell, a former Freedom chief executive and now a member of the creditor committee.

The family of R.C. Hoiles and private equity firms Blackstone Group LP (BX.N) and Providence Equity Partners, as present owners of the company, would get stock and warrants representing 12 percent of the new company under the proposed plan.

Bell, whose pension is at risk in the bankruptcy, blasted the "unholy alliance" of shareholders and bankers for the proposed plan.

He said the proposed plan made a mockery of JPMorgan's "Way Forward" advertising message.

"In terms of cruelty, they are blazing a new trail," he said. "If they worried, in terms of regulation, they couldn't put themselves in a worse possible light."

The bankruptcy code generally gives a company the exclusive right to propose a plan of reorganization. However, creditors can ask the court to terminate that right, as they did in the case of regional theme park operator Six Flags Inc (SIXFQ.OB).

Six Flags accepted much of an alternative plan proposed by noteholders who fought an initial plan. As in the case of Freedom Communications, Six Flags' initial plan was filed with the backing of JPMorgan.

JPMorgan could not be reached for comment.

Freedom Communications did not immediately comment.

The creditors' committee have asked the court to hear their request on Nov. 23.

The case is In Re: Freedom Communications Holdings Inc, U.S. Bankruptcy Court, District of Delaware, No. 09-13046