Tribune creditors want Zell out, investigation on buyout

Creditors of Tribune Company are seeking to oust chief executive Sam Zell and hire a special counsel to investigate into the highly leveraged $8.2-billion acquisition that took Tribune private in 2007. (See: Tribune goes private; Sam Zell named chairman and CEO)

The creditors of Tribune, which had filed for bankruptcy protection in January 2009 after amassing $13-billion debt, (See: Tribune files for bankruptcy protection)  has asked the federal bankruptcy court to hire an outside law firm, Zuckerman Spaeder LLP to investigate the debt that Zell took on in order to fund the $8.2 billion acquisition of publicly traded Tribune and make it private in December 2007.

Seven of the nine members on the creditors' committee have filed for the request in the federal bankruptcy court. The two members of the creditors' committee, who have refrained from the request, are JPMorgan Chase Bank and Merrill Lynch Capital - the original financiers of the acquisition.

The financing of Zell's transaction involved the creation of an employee stock programme that has incurred a significant amount of debt. However, Zell has the right to buy up to 40 per cent of it in the future.

But the New York Post, citing a source familiar with the matter, reported yesterday that Zell is open to giving up his claims to buy a 40-per cent stake in the company.

The warrant gives Zell the right to buy about 40 per cent of the company for $500 million, the paper said.