Tuesday, June 15, 2010

Tribune Bondholders Ask FCC to Halt License Transfer

By Steven Church -Bloomberg.com

June 15 (Bloomberg) -- Tribune Co. should be blocked from transferring its broadcasting licenses to the lenders who financed the publisher’s 2007 buyout, bondholders said in an objection filed with U.S. regulators.

The bondholders asked the Federal Communications Commission to reject Tribune’s application to reassign its broadcasting licenses as part of the company’s bankruptcy exit plan. Under the plan, bondholders owed about $1.2 billion would be paid nothing, while the lenders would get more than 90 percent of Tribune.

Tribune, which owns the Los Angeles Times and Chicago Tribune, is trying to get around U.S. rules limiting foreign ownership of television and radio stations by giving lenders warrants to purchase new stock, the bondholders, represented by their agent, Wilmington Trust Co., said in documents filed yesterday.

“This is a sham,” attorneys for Wilmington Trust wrote. “The warrants will be worthless to the prospective holders, who will, by definition, be non-U.S. citizens, since they cannot be exercised without violating” federal law.

Tribune filed for bankruptcy in December 2008, about one year after real-estate billionaire Sam Zell used more than $8 billion in loans to take the Chicago-based company private. The buyout has divided creditors, with lower-ranking bondholders claiming it violated bankruptcy laws.
Gary Weitman, a Tribune spokesman, declined to comment.

Buyout Probe

U.S. Bankruptcy Judge Kevin J. Carey in Wilmington, Delaware, approved an investigation of the buyout. UCLA law professor Kenneth N. Klee is scheduled to file a report next month on whether the buyout was a fraudulent transfer that can be successfully challenged by the bondholders.

Tribune’s creditors must vote on the proposed bankruptcy exit plan by July 30. Carey will take the tally into consideration when he holds a hearing in August to decide whether to approve the reorganization and allow Tribune to exit court oversight.

The plan asks creditors to give up the right to sue Zell and lenders over claims they left Tribune insolvent after the 2007 buyout.

The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).

--Editors: Andrew Dunn, Steve Farr.

To contact the reporter on this story:
Steven Church schurch3@bloomberg.net.

To contact the editor responsible for this story:
David E. Rovella at drovella@bloomberg.net.

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