Banks Sued Six Months After the The Cubs Were Cleansed in Chapter 11
Remember that Crain's reported that the the solvent Chicago Cubs would made a quick trip last fall through chapter 11 for a cleansing bath and chapter 11 injunction to make the entity easier to sell, and my former partner's query whether the Cubs would need bankruptcy court approval to put on the take sign in a key game that could effect the value of the franchise ? Perhaps one of the reason was anticipation of a suit filed last week by Tribune bondholders challenging bonds sold prior to Sam Zell buying the Tribune in a massive leveraged buyout that ended in Chapter 11. Set out below are some excerpts from an article by Randal Chase regarding the allegations.
"DOVER, Del. — Bondholders in the Tribune Co.'s Chapter 11 bankruptcy case are suing the banks that financed the media company's 2007 leveraged buyout, claiming they knew that the resulting debt load would leave Tribune insolvent.
The lawsuit was filed in U.S. Bankruptcy Court in Wilmington by Wilmington Trust Co., agent for holders of $1.2 billion in bonds sold by the company before real estate mogul Sam Zell led Tribune's $8.2 billion buyout.
The bondholders argue that the deal was fraudulent because it loaded up the company with too much new debt that was used to cash out Tribune stockholders. They want a bankruptcy judge overseeing Tribune's Chapter 11 case to reject the banks' secured claims, or at least have them paid only after the bondholders' unsecured claims are satisfied. Typically, secured claims get higher priority.
Defendants in the lawsuit include JPMorgan Chase, Citigroup, Bank of America and its Merrill Lynch subsidiary, the lead banks involved in the leveraged buyout, or LBO. Representatives of Tribune and the banks declined to comment Friday."
