CHICAGO — Tribune Co. and its creditors agreed Monday to accept the appointment of an independent bankruptcy examiner in the Chapter 11 case, opening the door to further scrutiny of Tribune Chairman Sam Zell's controversial 2007 leveraged buyout of the Chicago-based media conglomerate.
The examiner, who will be appointed by the U.S. Bankruptcy Court trustee in Delaware by the end of the week, will be free to inspect all aspects of the case, including the buyout and the fairness of a settlement reached this month between Tribune and some of its creditors.
For The Record
Los Angeles Times Thursday, April 22, 2010 Home Edition Main News Part A Page 4 News Desk 1 inches; 44 words Type of Material: Correction
Tribune bankruptcy: The headline with an article about Tribune Co.'s bankruptcy that appeared in Tuesday's LATExtra section said a judge would appoint an examiner in the case. As the article stated, the examiner will be appointed by the U.S. Bankruptcy Court trustee in Delaware.
The move comes after U.S. Bankruptcy Judge Kevin Carey signaled his support for an examiner at a hearing April 13. He also supported a compromise reorganization plan submitted by Tribune, whose media properties in Los Angeles include The Times and KTLA-TV Channel 5.
But given the complexity of the legal issues in the case, Carey is seeking a broader consensus on the plan and wants legal support to help him sort out the mess in the event the plan is ultimately contested, sources said.
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.
Legal experts say the appointment of an independent examiner could speed up negotiations. But it also could raise new issues that might complicate the case.
Junior creditors in the case have charged that Tribune Co., Zell and the lenders who financed the 2007 leveraged buyout engaged in "fraudulent conveyance," meaning that the debt-laden transaction they constructed rendered the company insolvent from the beginning.