Will Tribune Co. be Able to Hire its Desired Financial Advisors?

By: RANDALL CHASE A bankruptcy judge will consider whether Tribune Co. can hire a financial advisory firm that worked for one of the company's chief newspaper rivals.

Judge Kevin Carey on Friday set March 12 as the date for arguments on a request by Tribune for authorization to hire Lazard Freres & Co. as investment banker and financial adviser.

The request is opposed by the U.S. trustee in the case, who believes Lazard should be disqualified because it failed to disclose that it was hired last year by the Chicago Sun-Times, a chief competitor to the Chicago Tribune, to assist the Sun-Times in evaluating its strategic alternatives. The trustee also noted that Lazard was hired in 2003 by the Sun-Times, then known as Hollinger International, to help with its restructuring efforts.

Joseph McMahon Jr., an attorney for the trustee, said Lazard's failure to disclose its connections with the Sun-Times was intentional and grounds for denial of employment. He also argued that Lazard may have a conflict if it advised the Sun-Times after Tribune's bankruptcy filing.

Tom Labuda Jr., an attorney for Lazard, denied the trustee's allegations. Labuda noted that Lazard's relationship with the Sun-Times was a matter of public record, and that Lazard had touted its experience advising media companies, including the Sun-Times, in interviewing for employment in the Tribune bankruptcy.

"There was clearly nothing that Lazard was trying to hide," Labuda said.

Tribune, which owns the Los Angeles Times, Chicago Tribune, The Sun of Baltimore, The Hartford Courant and other dailies, as well as 23 TV stations, sought bankruptcy protection in December because of dwindling advertising revenues and a debt load of $13 billion.

According to court papers, Lazard entered into an agreement with Tribune less than week before Tribune filed for bankruptcy protection.

In a declaration submitted to the court Thursday, Lazard Freres managing director James Millstein said Lazard's work for the Sun-Times "largely ceased" last September, but the relationship was not formally terminated until Jan. 30 of this year.

According to court filings, Lazard would receive $200,000 a month for its work with Tribune, and a $16 million payment upon completion of a restructuring or another significant resolution of the case.