WILMINGTON, Del. (CN) – Another group of creditors has sued Sam Zell and others who engineered and benefited from Zell’s leveraged buyout of now-bankrupt Tribune Company. The two new complaints were allowed by U.S. Bankruptcy Judge Kevin Carey, who permitted the adversary filings because of statutory limitations.
The Committee of Unsecured Creditors filed two complaints in U.S. Bankruptcy Court on behalf of the bankruptcy estates of Tribune and its subsidiaries. Naming more than 100 defendants, the committee calls the leveraged buyout of Tribune “among the worst in American corporate history.”
“This is like carrying a fat person up Everest, hopefully it doesn’t kill us,” an engineer of the buyout is quoted as saying in one complaint, which names Zell and the Chandler Trust among the defendants.
In that complaint, JPMorgan Chase and Merrill Lynch head the list of banks, lenders and advisers accused of benefiting from the leveraged buyout of Tribune in 2007, by garnering more than $120 million in fees. (This complaint is downloadable in two parts.)
Sam Zell and Tribune’s management, directors, officers and large shareholders are the target of the second complaint. Both were filed on behalf of the Tribune Co. et al.
According to the second complaint, Tribune’s management facilitated the leveraged buyout by “caving to the pressure from large shareholders and the lure of substantial financial incentives.”
Those large shareholders “collected billions of dollars and then – finally satisfied with the enormous value they had extracted from their stock – walked away from the ruined company,” the complaint states.
Tribune Chairman Sam Zell used an employee stock ownership plan, or ESOP, as the takeover vehicle, “by enticing Tribune’s directors and officers with tens of millions of dollars in stock sale proceeds and special incentives to close his deal,” according to the complaint.
Tribune filed for bankruptcy less than a year after Zell closed the merger, which he financed in great part by piling debt onto the company he was buying.
Another lawsuit, with similar defendants, was filed Friday in New York County Court by a group of institutional investors. That suit took aim at the banks that financed the leveraged buyout and the fees they earned from the deal.
This has been a turbulent two weeks for Tribune Company, owner of the Los Angeles Times, Chicago Tribune and other media outlets.
In addition to the recent lawsuits, Tribune CEO Randy Michaels resigned under pressure from the company’s board of directors. His controversial management style was skewered in a New York Times article that revealed deep resentment by Tribune staff to Michaels’ frat boy corporate culture.
The adversary suits were filed by Thomas Macauley with Zuckerman Spaeder.