Examiner Finds Signs of “Dishonesty” in Tribune LBO

(Reuters) – The court-appointed examiner investigating Tribune Co’s bankruptcy said he has found some evidence of dishonesty in the 2007 leveraged buyout of the company, court documents showed.

The report, which investigates whether real estate developer Sam Zell’s 2007 leveraged buyout of Tribune left the media company insolvent, is of particular interest to junior bondholders, who say their best hope of a recovery from the bankruptcy would lie in billions of dollars of senior claims being disallowed.

Bankruptcy examiner Kenneth Klee, however, said he did not find any credible evidence against the large stockholders, lead banks, the financial advisers, as well as the Zell Group.

Tribune’s businesses include the Chicago Tribune and Los Angeles Times newspapers, as well as television stations such as the superstation WGN and WPIX-TV in New York.

Klee said Tribune did not act forthrightly in procuring the solvency opinion issued by Valuation Research Corp (VRC).

Klee said he found evidence indicating that Tribune’s senior financial management did not apprise the Tribune board and special committee of relevant information underlying management’s October 2007 projections on which VRC relied in giving its solvency opinion.

However, Klee also said he “found that other aspects of management’s projections, while aggressive, do not support the conclusion that the senior financial management at Tribune prepared them in bad faith.”

The case is In re: Tribune Co et al, U.S. Bankruptcy Court, District of Delaware, No. 08-13141. (Reporting by Sakthi Prasad in Bangalore; Editing by Muralikumar Anantharaman)