Monday, March 29, 2010

Tribune Co.: Bankruptcy Is Expensive

Chicago Tribune buildingImage via Wikipedia
According to reports in The Chicago Tribune and The Am Law Daily Web site, more than $138 million in legal fees have been racked up since The Tribune Co. filed Chapter 11 bankruptcy reorganization proceedings 15 months ago, and an irate group of bondholders is asking a court to order banks that backed the leveraged buyout plan in 2007 that enabled former owner Samuel Zell to take the company private to repay $25 million used to cover the banks' legal fees.

A Tribune Co. subsidiary that did not file for bankruptcy covered the legal fees of banks involved in the Tribune LBO, which skirted the requirement that the bankruptcy court ok payments for professional fees. The $138 million in attorneys' fees represents about 25 percent of the media conglomerate's 2009 cash flow. U.S. Bankruptcy Court Judge Kevin Carey last year admonished attorneys involved in the case for hourly billing rates exceeding $1,000. Observers note that bankruptcy rates have risen roughly 10 percent annually over the last decade, and insolvency proceedings involving major corporations, such as Enron, United Airlines, and Lehman Bros. are costly affairs, so the legal fees to date for the Tribune bankruptcy are not out of line. Still, that's a tough case to make in view of one law firm that has billed the Tribune bankruptcy trustees $110,000 in photocopying costs.

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