Bondholders call Trib purchase a bankrupt deal

The bondholders who helped gave Sam Zell the leverage to takeover Tribune Co. through a massive borrowing scheme now say the deal was fatally flawed from the start. In other words, Tribune was destined for bankruptcy court before the ink dried.

The technical term for all of this is a "fraudulent conveyance," but I'm sure Tribune Co. employees can think of a few less jargony terms.

The bondholders might ask the bankruptcy judge to appoint an independent investigator to look into the deal to see if senior lenders, such as JP Morgan, and Tribune managers sold them a bill of goods.

From the Wall Street Journal:

Such allegations can be difficult to prove, entangling opposing bankers and lawyers in a debate over what was a proper valuation at the time of the deal. "Insolvency is an easy concept to state but a difficult concept to prove," said Bill Welnhofer, managing director and head of restructuring at investment bank Robert W. Baird & Co. in Chicago.

The bondholders' filing seeks disclosure of emails, interviews and internal memos used by Tribune, its financial advisers and its lending banks. It requests information about what is known as a solvency opinion -- an independent evaluation of a company's ability to pay its debts following the assumption of debt.

Tribune Co. said it had every reason to believe at the time of the deal it could manage the debt; things just turned out worse than expected.