Tuesday, June 22, 2010

White & Case Gets First Crack at Sam Zell

By Zach Lowe, The Am Law Daily

It is a moment everyone in the Tribune Co. bankruptcy case has been waiting for: the deposition of Sam Zell, architect of the leveraged buyout that sunk the media empire.
The Tribune company bankruptcy has been among the most contentious Chapter 11 cases we've seen, but the Trib estate, represented by Sidley Austin, has begun the process of gathering support for a proposed reorganization plan that would bring the company out of bankruptcy and pay off creditors at varying levels.

Hovering over that plan, though, is the claim by some bondholders that Zell's leveraged buyout of Tribune was a so-called fraudulent conveyance, meaning the process left the company insolvent.
If a judge finds that the buyout was indeed a fraudulent conveyance, the entire Chapter 11 case could be turned on its head, experts have told us. The lenders who arranged the LBO--chiefly JPMorgan Chase--could be blocked from recovering anything for the Tribune debt they now hold. The estate could also have claims against the banks and Zell, according to our prior reporting.

And Zell will finally talk in a deposition scheduled for June 28th, according to court records. And who will be doing the questioning? The prize goes to White & Case partner Thomas Lauria, court records show. Lauria, who took on the Obama administration in opposing the Chrysler bankruptcy plan until the bitter end, represents Wells Fargo, a bridge lender to Tribune that has not committed to support the proposed reorganization, according to court records.
Bondholders, including a group advised by Brown Rudnick, who have called for an aggressive examination into fraudulent conveyance claims, will have to wait in line behind Lauria for now. But they'll certainly be watching to see what Zell says in 11 days.

Lauria did not return messages seeking comment.

Two sources familiar with the matter tell us Jenner & Block will be representing Zell during that deposition. That's not a surprise, since court records show Jenner has advised Zell individually in other Tribune proceedings. A Jenner spokesman did not immediately return a call seeking comment.

One a side note: Kenneth Klee, the examiner appointed last month to investigate the collapse of Tribune, is well into his work and now estimates the process of producing his report might cost twice as much as he originally estimated, according to a separate filing.
Klee, a name partner at the bankruptcy boutique Klee, Tuchin, Bogdanoff & Stern, is scheduled to complete his report by July 12th. He originally guessed the work of producing the report might cost about $4 million or $5 million, according to an update Klee filed Wednesday night.
Now that he and his crew have waded into the morass that is the Tribune case, they say it may cost between $7.5 million and $8 million, court records show.

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