By: E&P Staff When Tribune Co. went private in 2007, funded by going-private transaction, funded by $8.6 billion in debt, the company was actually insolvent, rendering the deal a "fraudulent conveyance," a group of unsecured creditors argue in a motion filed in the Chicago media giant's bankruptcy case.
After an investigation that included getting documents from Tribune, the Official Committee of Unsecured Creditors formally asked U.S. Bankruptcy Court in Delaware for permission to file a complaint alleging fraudulent conveyance in the leveraged buyout engineered by real estate mogul Sam Zell. The complaint would allege that the senior lenders who funded the deal, and are claiming nearly all equity in the company in bankruptcy, knew from the start the transaction would inevitably lead to bankruptcy, and so should be cut out of access to Tribune assets.
At the same time, Tribune management, which has had the exclusive right to forge a restructuring plan since the company filed for bankruptcy in December 2008, asked the court to extend that "exclusivity" into June.
Right now, Tribune must file a plan by the end of this month. In its separate filing Monday, Tribune said it expected to file a plan, but that maneuvering by the unsecured creditors might prolong litigation.
Chicago Tribune reporter Michael Oneal reported Tuesday that Tribune Co. CEO Randy Michaels and COO Gerry Spector said in an e-mail to employees that said "we believe a plan of reorganization acceptable to all our creditors is achievable, and the negotiations with them are active and ongoing."
Citing unnamed sources, Oneal said both sides in the dispute say privately that the fraudulent conveyance allegation is a negotiating tool intended to get more post-bankruptcy assets for the unsecured creditors.
A hearing has been set for Feb. 18.
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