A bankruptcy examiner's report which found dishonesty in Tribune Co's leveraged buyout will remain sealed until the bankruptcy judge resolves confidentiality issues surrounded the release of the report. But a 20-page summary of the report was released this week pending the resolution of confidentiality claims.
The report concluded Tribune did not act forthrightly in getting an independent opinion about the company's solvency. The report also found a court was somewhat likely to find part of the $8.2 billion leveraged buyout that put developer Sam Zell in control of the Chicago Tribune and Los Angeles Times owner constituted intentional fraudulent transfers.
Tribune Co's Chapter 11 bankruptcy has been plagued by creditor claims that the company engaged in fraud when it went through a leveraged buyout which eventually sunk the company into bankruptcy. Junior creditors, who were asked to approve a proposed bankruptcy reorganization plan which would leave them with nothing, have already called for the full disclosure of the examiner's report and are considering litigation against the bankrupt company. Senior bondholders, who would receive a small stake of ownership in the post-bankruptcy Tribune in exchange for dropping any legal claims stemming from the company's bankruptcy, is also calling for full disclosure of the examiner's report.
As it stands, the bankruptcy examiner's findings of fraudulent transfers threatens to kill Tribune Co's bankruptcy reorganization and cause a series of litigation that could displace senior creditor claims in favor of junior bondholder's who claim that the leveraged buyout caused the bankruptcy of the company and in turn prevented them from being fairly compensated in Tribune Co's Chapter 11 bankruptcy case. The bankruptcy judge is considering extending the deadline for a vote on the company reorganization plan in light of the examiner's report.