Tribune agrees on appointment of bankruptcy examiner to look at 2007 buyout

Tribune reaches agreement on bankruptcy examiner

WILMINGTON, Del. — Attorneys in the Chapter 11 bankruptcy of the Tribune Co. presented a judge Monday with a draft agreement for the appointment of an independent examiner to look at issues surrounding the 2007 leveraged buyout of the media conglomerate.

The agreement was reached less than a week after Judge Kevin Carey indicated that he believed an examiner was needed to conduct at least a narrow investigation of issues surrounding the buyout engineered by real estate mogul Sam Zell.

Under the proposal presented Monday, the examiner would rely on information already submitted in the case because of questions raised by Tribune’s committee of unsecured creditors and a group of junior bondholders who would be left with nothing under a reorganization plan that Tribune submitted last week.

The examiner also would review the settlement that Tribune announced with certain creditors and which paved the way for the filing of its reorganization plan.

The bondholders, represented by Wilmington Trust, allege in a lawsuit filed last month that JPMorgan, Bank of America and other banks that financed the buyout engaged in fraud because they knew the resulting debt load would leave Tribune insolvent. They had filed a motion in January asking the judge to appoint an examiner to investigate issues surrounding the buyout.

The attorney representing the U.S. trustee in the case supported the request for an examiner, telling Carey last week that it could bring much-needed efficiency to Tribune’s bankruptcy case and resolve suspicions surrounding the company’s treatment of various creditor groups.

Under Tribune’s plan, major lenders such as JPMorgan would hold a 91 percent stake in Tribune worth about $5.56 billion, based on the company’s appraisal of its value. Centerbridge Partners, which leads a group that owns outstanding senior bond debt, would get a 7.4 percent stake, paid in a combination of cash, stock and debt under the plan. That would translate to about $451 million, or roughly 35 cents for every dollar owed to the senior noteholders.

Attorneys indicated on Monday that their discussions over the past week have centered on authorizing a review by the examiner while not interfering with the schedule for a confirmation hearing on Tribune’s reorganization plan, which will be the subject of a weeklong trial scheduled to start Aug. 16.

“We don’t want to see the examiner reinvent the wheel,” said Donald Bernstein, an attorney representing JPMorgan.

William Harrington, representing the U.S. trustee, echoed Bernstein’s remarks, telling Carey that the central repository holding documents related to the buyout should provide ample material for the examiner.

“There are 3 million documents already available,” he said.

Carey scheduled a status hearing regarding the scope and cost of the examiner’s investigation for May 10. Plans call for the examiner’s report to be submitted in mid-July, in advance of the Aug. 1 deadline for objecting to Tribune’s reorganization plan.

“I was of the view, and I still am, that there is sufficient time for such an investigation to be completed,” said Carey.

Carey also warned attorneys that despite the reams of material filed under seal in the Tribune bankruptcy, he expects that there will be a public version of the examiner’s report.

“Ultimately, it strikes me that this is a report that must be made public at some point. Parties have to understand that now,” he said. “… It’s a matter, it seems to me, of great public interest.”