Bankruptcy Judge Kevin Carey has appointed an independent bankruptcy examiner to Tribune Co’s Chapter 11 bankruptcy case with the agreement of both Tribune and the company’s creditors. The bankruptcy examiner will primarily scrutinize Tribune Chairman Sam Zell’s controversial 2007 leveraged buyout of the Chicago-based media conglomerate. Junior creditors in the Chapter 11 bankruptcy case accused Tribune Co., Sam Zell and the lenders who financed the 2007 leveraged buyout of engaging in “fraudulent conveyance” saying that they knew the deal would end in the company needing to file bankruptcy.
The bankruptcy examiner will also inspect all aspects of the Chapter 11 bankruptcy case, the details of the leveraged buyout and the fairness of the settlement agreement reached this month between Tribune and its creditors. By appointing an examiner, the bankruptcy judge will give himself the added legal support for any decision he makes regarding the proposed bankruptcy exit plan.
Carey said he wanted the examiner inquiry to occur in parallel with continuing negotiations between the company and its creditors to broaden the proposed reorganization plan. Toward that end, the judge set the week of Aug. 16 for confirmation hearings on the plan, and the examiner’s report will be due in mid-July.
And while the appointment of an independent bankruptcy examiner could speed up the negotiations between Tribune and its creditors, the investigation could also uncover new issues that may further complicate the already hotly contested Chapter 11 bankruptcy case. The appointment of the bankruptcy examiner also will not guarantee that junior creditors won’t pursue litigation against Tribune if the settlement or the findings of the examiner are not in their favor.