A New York-based private equity firm specializing in distressed debt has become a leading investor in the parent company of the Orange County Register as it emerges from bankruptcy.

Angelo, Gordon & Co. has gained a key stake in Irvine-based Freedom Communi-cations Inc. by acquiring part of its debt during its bankruptcy reorganization, according to Freedom and sources familiar with the situation.

The firm has less than a majority stake, according to one source. Another said it’s close to what two private equity firms used to have in Freedom, or about 45%.

Representatives of Freedom and Angelo Gordon declined to comment.

The investment is seen as a bullish sign for Freedom, which runs 33 newspapers and eight television stations.

“The company’s prospects are vastly underappreciated,” said Alan Bell, who served as the company’s chief executive from 2002 to 2006. “The hunger for information and entertainment hasn’t gone away.”

Bell serves on a committee of unsecured creditors in Freedom’s bankruptcy. The group is made up of former employees with pensions as well as vendors and others.

The committee is set to disband once Freedom emerges from bankruptcy, which could be any time now. A federal judge approved Freedom’s reorganization plan on March 10.

“With the right management and new ownership, Freedom’s future won’t be so burdened by a bad balance sheet,” Bell said. “It’s not surprising that investors are showing interest.”

Freedom filed for bankruptcy in September after trying to strike a deal to appease creditors holding about $1 billion in debt.

Most of the debt was incurred in a 2004 buyout by private equity firms Blackstone Group LP and Providence Equity Partners LLC that kept members of Freedom’s founding Hoiles family in control.

As part of the company’s reorganization, secured debt holders—including investment banks as well as Angelo Gordon—are taking over ownership in exchange for forgiving about $445 million in debt.

Post Bankruptcy

Freedom is set to emerge from bankruptcy with about $325 million in debt.

The company is expected to soon update its ownership. Going into bankruptcy, a group of 27 lenders led by JPMorgan Chase & Co. and including SunTrust Banks Inc. and Union Bank NA of California held Freedom’s secured debt.

The creditors-turned-owners have put a new board in place. For the first time since R.C. Hoiles bought the Register in 1935, the board doesn’t include one of his descendents.

Board members include: Jim Dunning, a media investor who worked at Rolling Stone and ran Ziff Davis Publishing Co.; Don Grenesko, former financial chief of Los Angeles Times parent Tribune Co. of Chicago; Ross Levinsohn, founding and managing director of Fuse Capital in Palo Alto; and Sean P. Moriarty, entrepreneur in residence at Menlo Park venture capital firm Mayfield Fund.