Saturday, October 24, 2009

Tribune Co. bankruptcy case: Bondholder group says company hid fees

From Tribune staff
Group also alleges media company favors senior lenders

A dissident bondholder group in Tribune Co.'s Chapter 11 bankruptcy case accused the company and its senior lenders of hiding "millions of dollars" worth of fees that it said were being paid to law firms and investment banks employed by the lenders.

In a court motion filed Friday, Law Debenture Trust Co., the bondholder group's trustee, said senior lenders pressured Tribune Co. to have subsidiaries not included in the original Chapter 11 filing, including the Chicago Cubs, pay fees owed to law firms and investment banks employed by the lenders.

Since those lenders are also unsecured creditors, fees paid to their advisers must by law be disclosed, the motion said.

The bondholders also accused Chicago-based Tribune Co., owner of the Chicago Tribune, of favoring the senior lenders in negotiations toward a restructuring settlement and participating in a "plan to assist in burying the estate's claims against the ... lenders."Those potential claims were raised earlier in the case by the same bondholder group, which is led by New York private-equity firm Centerbridge Partners.

The group has argued since August that Chicago billionaire Sam Zell's $8.2 billion bid to take Tribune Co. private was doomed from the start, meaning claims by the lenders that financed the deal -- JPMorgan Chase and Merrill Lynch, among others -- should be invalidated. If such a "fraudulent conveyance" claim could be proved, the senior lenders would go away empty-handed, leaving more value in the estate for other creditors like the bondholders.
Law Debenture and Centerbridge earlier accused the Committee of Unsecured Creditors of being conflicted because two of the senior lenders were members.

As a result, the bondholders pressed for special counsel to seek out evidence of fraudulent conveyance.

Tribune Co. declined to comment but said it would respond by a court-appointed date of Nov. 9.

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