By: The Associated Press
Tribune Co. lenders who oppose the publisher’s reorganization are seeking to question Chairman Sam Zell, the real-estate billionaire who led the company’s 2007 buyout and then put it into bankruptcy a year later.
A group of lenders owed $1.6 billion related to the buyout plan to question Zell under oath June 28 in New York, according to a notice filed in Tribune’s bankruptcy case in Wilmington, Delaware.
Tribune’s reorganization proposal asks creditors to give up their right to sue company insiders, including Zell, and the lenders who financed the buyout over claims they left the company insolvent.
Some lower-ranking creditors alleged the buyout was a fraudulent transfer because it added more than $8 billion in debt to the Chicago-based company while benefiting only Zell and the shareholders.
The lenders who seek to question Zell have a lower payment priority than JPMorgan Chase & Co. and others who provided buyout loans. The lower-ranking lenders would only get back about $7 million, they said in court papers.
The senior lenders would recover about 62 percent of the $8.72 billion they are owed in the form of more than 90 percent of new stock to be issued by Tribune and more than 90 percent of a new secured loan.
The junior lenders claim they could get $74 million if the company fights and defeats any lawsuits related to the buyout.
Gary Weitman, a Tribune spokesman, didn’t immediately return a call for comment.
A group of bondholders who would recover nothing from Tribune’s reorganization asked the Federal Communications Commission to reject the company’s application to reassign its broadcasting licenses as part of the bankruptcy exit plan.
Tribune owns the Los Angeles Times, the Chicago Tribune, broadcasting stations in Los Angeles and other U.S. markets as well as stakes in cable channels.
Tribune filed for bankruptcy in December 2008.
U.S. Bankruptcy Judge Kevin J. Carey in Wilmington, Delaware, approved an investigation of the buyout. University of California Los Angeles law professor Kenneth N. Klee is scheduled to file a report next month on whether the buyout was a fraudulent transfer that can be successfully challenged by the bondholders.
Tribune’s creditors must vote on the proposed bankruptcy exit plan by July 30. Carey will take the tally into consideration when he holds a hearing in August to decide whether to approve the reorganization and allow Tribune to exit court oversight.
The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).