Bondholders seek probe into Zell’s $8.3-billion LBO

Bondholders of newspaper and television station owner Tribune Co have approached a bankruptcy court judge for allowing them to scritinise the company's 2007 sale to real estate billionaire Sam Zell.

They say the deal over-burdened the company beyond its capacity thus causing its fall.

In a filing late Wednesday before Delaware court, the bondholders say, the fraudulent deal weighed down a business which was already in decline and the banks that put together the deal with Zell's $8.2 billion leveraged buyout (LBO) "now concede the transaction was a mistake.''

The bondholders intend to stall Tribune's exit from chapter 11 protection under the existing plan that they say will virtually hand over the company to the very banks that caused its demise. The group representing 18 per cent of the company's bonds has demanding access to related e-mails and other communications as well as interviews of key participants in the deal.

Zell acquired Chicago-based Tribune, that owns the Los Angeles Times and Chicago Tribune in addition to several dailies and 23 TV stations and then took the company private in December 2007 becoming its chairman and CEO.

The deal had come in for a last minute scrutiny due to declining conditions at the Tribune by the four financing banks – JP Morgan Chase & Co, Merrill Lynch & Co, Citigroup Inc and Bank of America Corp.