In exchange, the company's secured lenders, led by JPMorgan Chase, would cut the amount of debt Freedom owes them to $325 million, a nearly 60 percent reduction from $770 million.
Freedom said it hopes to emerge from Chapter 11 protection by the end of the month, but it still needs approval from the Federal Communications Commission regarding its broadcast licenses.
Brian Marchiony, a spokesman for JPMorgan, declined to comment on what the new ownership group plans for Freedom, but Burl Osborne, who was named interim chief executive officer last June, said he is looking to grow the company.
"I have been asked to continue serving as the CEO, and that's what I intend to do," said Osborne, 72, a former publisher of The Dallas Morning News and former chairman of The Associated Press.
The new company's board would consist of Osborne and five newly appointed independent directors.
Freedom Communications Holdings Inc., which publishes The Orange County Register in California and more than two dozen other dailies and owns eight television stations, filed for bankruptcy protection in September.
Like other media companies that sought bankruptcy protection, Freedom saw its advertising revenue decline sharply as the recession deepened and more readers and advertisers turned from print publications to the Internet.
In an interview, Osborne said the new company "will have a new balance sheet, and we will begin with a debt load that is manageable, quite manageable."
Although he said it was too early to discuss possible consolidations and acquisitions, "we are looking to grow the company, and we think we now have a base upon which to build that will allow the company to grow and succeed down the road."
Freedom's Chapter 11 filing had been part of a prepackaged plan approved by a majority of the company's lenders.
Under that plan, the descendants of Freedom founder R.C. Hoiles and the investment firms Blackstone Group LP and Providence Equity Partners would have been left with a small stake as shareholders in the company.
The top-tier lenders would have received the rest of the equity in exchange for reducing debt.
But Freedom's unsecured, lower-tier creditors challenged that plan, saying that it would wrongly benefit shareholders who controlled the board of directors at the expense of unsecured creditors.
"I'm pleased to say we have resolved all outstanding objections," Freedom attorney Robert Klyman told Judge Brendan Shannon on Tuesday.
Shannon expressed his gratitude to the parties for ironing out their differences.
"It obviously was not lost on the court that this was a significantly contested matter. ... To say I'm pleased is an understatement," said the judge, who described the revised plan as "a good result for all creditors and constituents."
In addition to confirming the reorganization plan, Shannon approved Freedom's request to sell the East Valley Tribune in Arizona and several other Phoenix-area publications for a base price of about $2 million to 1013 Communications LLC, an affiliate of Thirteenth Street Media.
Thirteenth Street publishes the Explorer, a weekly in suburban Tucson, and the Telluride (Colo.) Daily Planet. The sale is expected to close by the end of this month.
Maya Pogoda, a spokeswoman for Freedom, said no other asset sales were planned as part of the emergence from bankruptcy.
Osborne said the company is not looking to reduce staff, other than completing the outsourcing of certain back-office functions in areas such as finance and information technology.
Under the reorganization plan, unsecured creditors stand to recover far more than the $5 million they would have shared under the initial plan, possibly as much as $56 million.
"This is a phenomenal result for unsecured creditors," said Robert Feinstein, an attorney for Freedom's official committee of unsecured creditors who described the original plan as "awful" and "offensive."
The plan leaves nothing for the former family and investment firm shareholders, who typically do not recover anything in bankruptcy cases.
Osborne said that in the end, family members put the welfare of the company above their own personal interests.
"It is hard to imagine how difficult that must be when the company and the family has a history such as theirs," he said.
Telephone messages seeking comment from Blackstone, Providence and Freedom chairman and Hoiles family member Thomas Bassett were not immediately returned Tuesday.
Under the reorganization plan, vendors and suppliers with claims against Freedom would get about $5 million. Pension holders would get about $12 million, representing 70 percent of their original pensions.
Other unsecured creditors, including plaintiffs in a lawsuit brought by newspaper carriers against the Register, would be the beneficiaries of a $14.5 million trust fund, part of which would be used to fund a lawsuit in which they could recover an additional $25 million.
Feinstein said the lawsuit likely would allege that certain Freedom officers and directors breached their fiduciary duties in the run-up to its bankruptcy filing.
Osborne said any such litigation "will not impact Freedom's operations."
Most of the creditors covered by the trust fund are newspaper carriers for the Register who reached a $28.9 million settlement last year over claims that they should have been considered employees instead of contractors.
The settlement was to have been finalized in September but was interrupted by the company's bankruptcy filing.
