Friday, August 13, 2010

Zell To Bankruptcy Court: "If lower creditors get money back, I want mine".

You really have to admire the chutzpah of Sam Zell. It was this kind of “chutzpah” that was displayed by the young man who after gambling away his fortune asked the Bankruptcy Court for sympathy because he was a pauper.
See below:

(Crain's) — Tribune Chairman Sam Zell is demanding his share of repayment in the media company's bankruptcy if lower-priority creditors, emboldened by a recently released examiner’s report, get anything.

By: Lynne Marek

EGI-TRB LLC, the company that the real estate mogul created to invest $315 million in debt and equity in the 2007 Tribune leveraged buyout, filed a conditional objection to the current plan of reorganization this week, saying it expects its debt claims to be repaid if creditors whose trustee is Wilmington Trust Co. get any payment.

The Wilmington creditors have about $1 billion in claims known as the "phones" notes.
EGI-TRB is slated to get nothing under the proposed reorganization plan currently on file in the Delaware Bankruptcy Court.

But that plan is now in flux in the wake of a bankruptcy examiner’s report buttressing Wilmington creditors' allegations against Tribune lenders that Mr. Zell’s deal left the company insolvent. Tribune attorneys have said that changes to the plan are likely.

“If the plan provides or is amended to provide any recoveries for the holders of the phones securities, then EGI-TRB’s claims must be paid in full,” attorneys for Mr. Zell said in the Aug. 11 filing.

The Wilmington creditors sued the lenders to the leveraged buyout in March, arguing that there was a “fraudulent conveyance” in the deal because debt assumed to finance it made the company insolvent. The creditors called on the court to appoint an examiner to review their allegations.

When Judge Kevin Carey appointed the examiner, he also bowed to other creditor demands that the Wilmington creditors be probed on whether their March lawsuit infringed on a court order to limit litigation and whether they made an improper disclosure of confidential information.

The examiner, attorney Kenneth Klee, concluded that a court would be “somewhat likely” to find that part of the leveraged buyout “constituted intentional fraudulent transfers” and that it was “highly likely” that a court would find that Tribune was “rendered insolvent and left without adequate capital.”

Mr. Klee also found that a court would be “reasonably likely” to find that the Wilmington creditors’ lawsuit didn’t violate the order. He also said that while Wilmington's disclosure didn’t comply with requirements, it wasn’t “intentional or reckless.”

Attorneys for Mr. Zell and Wilmington Trust declined to comment.

Broadcast Union News:
Sam Zell reminds me of the fellow who, having been convicted of the brutal murder of his parents, throws himself on the mercy of the court because he is an orphan.

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