Tuesday, May 11, 2010

Tribune's examiner says he will analyze strength of fraud claim

Bloomberg News

Kenneth N. Klee, the examiner for newspaper publisher Tribune Co., told the bankruptcy judge that he will issue a report by July 12 analyzing the strength of arguments that the $13.8 billion leveraged buyout led by Sam Zell in December 2007 included fraudulent transfers.

Some creditors claim Tribune operating subsidiaries pledged their assets for new loans without receiving equal value in return.

Klee concluded that making conclusions about the strength of the creditors' claims and the merits of the lenders' defenses was more useful than drawing up list of claims that might have merit.

Klee also said he would give his opinion on the remedies or damages creditors might be entitled to receive if he concludes there were fraudulent transfers as part of the buyout. Klee said he won't give his opinion on the virtue of the proposed settlement that creditors oppose.

With only 63 days for his report, Klee said the assignment was "daunting." He said creditors shouldn't expect a "multihundred" page "treatise," which he said "has become the practice."

The examiner's report for Lehman Brothers Holdings Inc. was more than 2,200 pages.

Klee estimated that his report will cost $4 million to $5 million.
(I'm in the wrong line of work! BD)

The bankruptcy judge called for the appointment of an examiner on April 20. Klee is a bankruptcy lawyer and a partner in the firm Klee, Tuchin, Bogdanoff & Stern LLP in Los Angeles.

Tribune filed a proposed Chapter 11 plan on April 12 to enact 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 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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