The unsecured creditors committee in Tribune Co.'s bankruptcy case asked a Delaware judge Monday for the right to sue Chicago real estate magnate Sam Zell and other investors and lenders who participated in the company's ill-fated 2007 leveraged buyout.
The motion was largely procedural, and the document said the request is not aimed at disrupting a court-ordered mediation in the case, which is scheduled for this month.
Lawyers for the committee had signaled at a previous court hearing that they would probably file a new complaint and ask for permission to pursue it because U.S. bankruptcy law would require bringing litigation surrounding the buyout within two years of the company's filing for Chapter 11 protection.
Tribune Co. made its initial filing Dec. 8, 2008, so the committee would have to win approval to bring its complaint by December this year.
Whether the committee actually launches its buyout-related litigation will probably depend on the outcome of the court-ordered mediation effort, which has yet to begin.
Tribune Co. and a welter of warring creditor groups, including the committee, have been working since Sept. 1 to prepare position papers for the mediator, U.S. Bankruptcy Judge Kevin Gross. Gross will then try to broker a compromise settlement of the buyout charges at sessions scheduled for Sept. 26 and 27.
Sources on all sides of the case acknowledged that forging a workable compromise will pose a stiff challenge for Gross. But in its papers Monday, the Official Committee of Unsecured Creditors said it "wholeheartedly supports the mediation process and the efforts of Judge Gross and the parties to achieve a consensual plan."
According to the motion, the committee's complaint would focus on allegations that the second part of Zell's two-step $8.2-billion buyout left the company insolvent, benefiting bank lenders, selling shareholders and others at the expense of junior creditors and the bankruptcy estate. The motion notes that the complaint would depend on the committee's own investigation and that of Kenneth Klee, an independent, court-appointed examiner who filed his own assessment of the potential charges in late July.
The suit names as defendants the senior debt holders, Zell's company, Tribune Co. officers and directors, selling shareholders, a valuation company that blessed the deal and others.
Under bankruptcy law, the debtor holds the right to bring such charges because the "fraudulent conveyance" ultimately damaged the bankruptcy estate. But because Tribune Co. officers and directors are potential targets of the litigation, the committee argued that it should be allowed to stand in for the debtor to avoid conflicts of interest that might weaken the case.
A spokesman for Tribune Co. — which owns the Los Angeles Times, Chicago Tribune, KTLA Channel 5 and other media properties — declined to comment.