Deadline set for report on Tribune bankruptcy
The bankruptcy judge signed an order yesterday formally calling for the U.S. Trustee to name an examiner to perform an examination of newspaper publisher Tribune Co.
The examiner, whose report is due by July 12, will investigate whether the $13.8 billion leveraged buyout led by Sam Zell in December 2007 included fraudulent transfers because operating subsidiaries pledged their assets for new loans and didn't receive equal value in return.
The bankruptcy judge also charged the examiner with investigating whether the indenture trustee for $1.2 billion in exchangeable subordinated notes violated the so-called automatic stay by filing suit in March against secured lenders who financed the LBO.
The suit is based on a theory known as equitable subordination. If the suit succeeds, the lenders, although secured, would be paid after the subordinated debt. The defendants in the suit include JPMorgan Chase Bank NA, Merrill Lynch Capital Corp., Citibank NA and Morgan Stanley & Co.
The lenders want the indenture trustee held in contempt for violating the automatic stay.
The examiner also will look into whether the indenture trustee disclosed information in the complaint that was required to remain confidential.
The bankruptcy judge will hold a status conference on May 10 to consider the examiner's work plan and estimated expenses.
Tribune filed a proposed Chapter 11 plan on April 12 to implement a settlement negotiated with some creditors. Before the plan was filed, holders of $3.6 billion in pre-bankruptcy secured debt announced their opposition to the plan and the settlement.
Tribune is the second-largest newspaper publisher in the U.S. The company listed $13 billion in debt for borrowed money and assets of $7.6 billion in the Chapter 11 reorganization begun in December 2008. It owns the Chicago Tribune, Los Angeles Times, six other newspapers and 23 television stations.
The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).