Creditors of Tribune Co. asked a judge to drop legal claims against shareholders who got less than $50,000 from the 2007 leveraged buyout that critics blame for the newspaper publisher’s bankruptcy.
The official committee of unsecured creditors asked U.S. Bankruptcy Judge Kevin J. Carey in Wilmington, Delaware, to remove the smaller shareholders from a so-called intentional fraudulent transfer lawsuit. The creditors claim shareholders wrongly benefited from the buyout because the debt taken on to fund the sale made Tribune insolvent.
Removing those shareholders from the case “will conserve the resources of the court and the debtors’ estates,” committee lawyers with the law firm of Zuckerman Spaeder LLP said in a May 4 court filing.
Tribune, the Chicago-based owner of the Los Angeles Times and the Chicago Tribune newspapers, filed for bankruptcy one year after the leveraged buyout led by real-estate billionaire Sam Zell. Since then, the company and hedge funds holding Tribune’s senior debt have sought approval for a plan to divide ownership among the lenders that financed the $8.3 billion buyout. Pre-buyout creditors oppose that plan, claiming Zell’s deal was doomed from the start.
The committee and other Tribune creditors have filed lawsuits seeking to hold shareholders and others involved in the transaction responsible for the bankruptcy, which would leave billions of dollars in debt unpaid under the proposed reorganization plan.
Tribune, valued earlier this year by the company at more than $7 billion, owes creditors about $13 billion.
The bankruptcy case is In re Tribune Co., 08-bk-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).