August 18, 2009

Tribune creditors seek to pressure Zell

Tribune Co. creditors asked a U.S. bankruptcy judge for permission to hire a law firm to investigate billionaire Sam Zell's leveraged buyout of the company.

Having put up $315 million for stock options, Zell controls the company.

However, an employee stock ownership plan owns Tribune, although it has no seat on the board that runs it, the Chicago Sun-Times reported Tuesday.

The Internal Revenue Service and the U.S. Labor Department are already investigating the takeover with a focus on the ESOP , which was set up to avoid taxes, the newspaper said.

Creditors have now asked to investigate the deal to pressure Zell to move aside and let creditors take over Tribune, which is $13 billion in debt, the newspaper said.

Zell privatized the company just as the Internet became a force for newspapers to reckon with, taking over advertising dollars and readers.

We have been fully cooperating with the review of our 2007 going-private transaction by the unsecured creditors' committee, Tribune Co. said in a statement.