By Michael Oneal |
A group of senior creditors in the Tribune Co. bankruptcy case charged Friday that the company’s largest junior bondholder was also part of a group led by California’s Chandler family that sought to buy the Chicago-based media conglomerate in 2007.

The charge is an attempt to blunt a legal strategy pressed by the junior bondholder, Centerbridge Partners, that aims to invalidate more than $8.6 billion in senior claims, leaving more for the junior creditors.

The heart of the junior creditor strategy is to show that a 2007
leveraged buyout orchestrated by Chicago real estate magnate Sam Zell
and financed by a bank group led by JPMorgan Chase was a case of
fraudulent conveyance, meaning the $8.2 billion transaction left the
company insolvent from the start.

The junior group has argued that it was obvious the deal would fail, given the unsound business conditions faced by Tribune Co.’s newspapers
and television stations, including the Chicago Tribune, conditions that
only deteriorated as the deal was consummated over a period of months.
The deal went forward, the argument runs, to enrich the banks and equity
shareholders at the expense of the existing bondholders.

The new charge from the senior group, however, seeks to show that
Centerbridge was part of a competing bid for the company brought by its
onetime largest shareholder, the Chandler family of California, which
put the company in play in 2006 after a feud with Tribune Co.
management. The motion was filed under seal and details or evidence of
this relationship are redacted in the public version of the filings.

The motion notes that the Chandler proposal “did not lead to a
transaction.” Zell competed
with another group at the end.

The court documents indicated that the senior group, led by distressed
investment hedge funds  Angelo, Gordon & Co. and Oaktree Capital
Management, asked Centerbridge’s attorney for discovery related to
Chandler relationship on Monday but was denied. Friday’s motion was a
formal request for the court to order discovery from Centerbridge.

On Wednesday, Tribune Co. asked the court for a fifth extension of its
exclusive right to devise a restructuring plan for the company. It said
it needed more time to broker a compromise between its warring creditor
groups. A hearing on that motion will be held April 13.

Centerbridge hadn’t filed a response to the senior creditor’s motion as
of late afternoon Friday.