The Tribune Company Bankruptcy

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Founded in 1847, the Tribune Company grew into a major national media company. By 2007, its holdings included newspapers such as the Chicago Tribune and Los Angeles Times, local and cable television stations, and the Chicago Cubs baseball team.

In 2007, billionaire Sam Zell orchestrated a leveraged buyout (LBO) of Tribune in which the public shareholders were bought out. Tribune borrowed more than $11 billion in connection with the LBO. Less than one year later, under the crushing debt load created by the LBO loans, Tribune filed for bankruptcy.

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Because of the structural priority of the LBO loans, the LBO lenders stood to receive the vast majority of the debtors’ assets, leaving little for Tribune’s other unsecured creditors, including the holders of senior notes and subordinated loans. The official committee of unsecured creditors retained Zuckerman Spaeder as special litigation counsel in 2009 to investigate, evaluate, and pursue claims arising out of the LBO.

Building a case

The Zuckerman Spaeder team, including Graeme W. Bush and Andrew N. Goldfarb, investigated whether the LBO loans were fraudulent conveyances and should be avoided or subordinated to the company’s other creditors. We obtained millions of pages of documents from dozens of parties; took deposition testimony from witnesses from LBO lenders, Zell’s businesses, the Tribune itself, as well as a number of sophisticated solvency experts for various parties; worked with financial advisors to evaluate the case for the insolvency of the company; and conducted an extensive legal analysis of the claims.

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After the U.S. Bankruptcy Court for the District of Delaware granted the committee standing to pursue LBO-related claims, we filed two complaints—one against the LBO lenders to avoid, as fraudulent conveyances, the obligations incurred from the LBO loans and another against officers, directors, shareholders, financial advisors to Tribune, and other third parties for a variety of claims. The second suit sought to recover the more than $8 billion Tribune paid to shareholders for their stock.

Achieving a record-setting settlement 

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The Bankruptcy Court stayed prosecution of both actions during the bankruptcy proceedings to focus on confirming a plan of reorganization. 

During the stay, Zuckerman Spaeder helped negotiate a settlement of the claims against the LBO lenders. The settlement increased unsecured creditors’ recovery from six or seven cents on the dollar to about 35 cents on the dollar. The settlement was incorporated in a plan of reorganization that was supported by the committee, the debtors, and the LBO lenders. Our firm was lead counsel for the committee in the confirmation trial on that plan in April 2011.

The firm presented closing arguments in late June 2011 before the Hon. Kevin J. Carey. In October 2011, the Bankruptcy Court found that the settlement was “fair, reasonable and in the best interests of the Debtors’ Estate,” and in July 2012, Judge Carey confirmed the Tribune plan of reorganization, including the settlement of the LBO lender claims.

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