Monday, April 5, 2010

Tribune Lenders Want To More Deeply Examine Zell Takeover

Bloomberg News

Some of the secured lenders to newspaper publisher Tribune Co. want to examine documents held by Centerbridge Partners LP. The lenders, themselves under attack for their roles in the $13.8 billion leveraged buyout led by Sam Zell in December 2007, contend that Centerbridge was working on a similar acquisition that didn't succeed.

In papers filed in Delaware bankruptcy court on April 2, the lenders say that Centerbridge owns 37 percent, or $475 million of Tribune's senior notes. While Zell was working on his LBO, the lenders describe how Centerbridge was working with a major Tribune shareholder on a competing offer.

Where Centerbridge now contends the 2007 LBO with Zell included fraudulent transfers, the lenders want to obtain documents showing how Centerbridge "contemporaneously viewed" the transaction. The motion to compel Centerbridge to produce documents is on the April 13 bankruptcy court calendar.

The secured lenders are also at odds with Tribune, although on a different issue.

Last week Tribune filed a motion for an extension until April 30 of the exclusive right to file a Chapter 11 plan. Tribune wanted the bankruptcy judge to shorten time for filing objections to the motion.

The secured lenders, saying they hold $4.6 billion in debt, object to being given only three business days to answer the motion, which is Tribune's fifth request to extend so-called exclusivity.

The lenders contend that the new exclusivity motion is devoid of details about negotiations on a Chapter 11 plan. The lenders want their time to answer the motion to be extended until three days after Tribune files it promised "supplemental filings" with details on plan discussions. The hearing on the exclusivity motion is scheduled for April 13.

The Tribune case is hung up in disputes over the LBO.

Creditors believe the LBO was a fraudulent transfer because operating subsidiaries put liens on their assets to finance the Zell acquisition while not receiving commensurate value in return.

Tribune is of the view that settling the claims through a plan is the best outcome.

Tribune is the second-largest newspaper publisher in the U.S. It 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 Delaware (Wilmington).

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