Date

Fri - 17.11.2017


Bankruptcy investigator: Tribune Co. buyout a 'fraudulent conveyance'

Bankruptcy investigator: Tribune Co. buyout a 'fraudulent conveyance'

An examiner appointed by the U.S. Bankruptcy Court has said the Tribune Co.'s 2007 US$8.2 billion buyout was "marred" by the "dishonesty and lack of candor" of senior managers at the time, the Chicago Tribune reported today.

In fact, the deal left it "too shaky to survive," after the company couldn't handle the massive debt load when the economy began crumbling, a Wall Street Journal article stated. The WSJ cites investigator Kenneth Klee's statement that it is "highly unlikely" the U.S. publisher was "rendered insolvent and without adequate capital" as a result of the deal, led by real estate mogul Sam Zell.

In a 700-page report filed with the bankruptcy court in Delaware, Klee concluded that the second part of the buyout is an example of "fraudulent conveyance," because the debt in the second half of the deal was so huge that it left the company unable to even pay its bills, the Tribune explained.

Despite the report's gloomy conclusions, the Tribune Co., which publishes flagship Chicago Tribune and the Los Angeles Times, among others, still expects to emerge from bankruptcy protection this year, The Associated Press reported late Tuesday afternoon.

Tribune CEO Randy Michaels and COO Gerald Spector told employees in a memo they only agree with some of Klee's conclusions, but would not comment further, as the full report is still under court seal. A hearing on whether the full document will be released is scheduled for Thursday in Delaware.

The 2007 buyout added $8.2 billion to Tribune's $5 billion debt at the time; however, Klee did not find "credible evidence of dishonesty" on the part of Zell or his associates, Editor & Publisher's Mark Fitzgerald opined.

"Heaven knows this column is no fan of Mr. Zell and the radiohead chums he gathered around him in Tribune Tower. But the Tribune's debacle has many fathers, and Zell's role in the tragedy isn't even particularly crucial," he wrote. "What's clear from the examiner's report is something a lot of us were saying during the months it took to bring the complicated deal to a close - the whole thing should simply have been called off."

Author

Leah McBride Mensching

Date

2010-07-27 23:54

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