• by Erik Sass  @eriksass1, December 28, 2010

One of the last top-level holdouts from Sam Zell's defunct management team is leaving the Tribune Co., with the departure this week of chief operating officer Gerry Spector.

Spector, who was one of Zell's handpicked appointments when he took control of the company in 2007, will leave at the end of this week, leaving the COO spot open as 2011 begins. His resignation was announced by the four-person council, drawn from members of the board of directors, which has been running Tribune since the departure of CEO Randy Michaels, another Zell appointment, back in October.

The news of the latest executive resignation comes amidst ongoing controversy over the planned bankruptcy reorganization of the Tribune Co., which entered Chapter 11 bankruptcy protection two years ago in December 2008. It remains saddled with $13 billion in debt -- including about $8 billion assumed in the transaction engineered by Zell to take the company private in October 2007.

Earlier this month, various groups of Tribune creditors submitted four rival bankruptcy reorganization plans for consideration by the Delaware bankruptcy court. If approved by the court, the competing plans will go to a vote at a special meeting of all Tribune creditors, which has yet to be scheduled. If no clear winner emerges, the decision may revert to Judge Kevin J. Carey of the Delaware bankruptcy court. In that case, he would consider the merits of the plans as well as relative creditor support as reflected in the votes.

A number of lawsuits are already in motion, as different groups of creditors vie to recoup funds related to certain contested parts of the original buyout deal. Some aggrieved plaintiffs claim the entire going-private transaction was doomed to insolvency from the start, and therefore a "fraudulent conveyance."

In November, the Committee of Unsecured Creditors, which includes eight Tribune bondholders, brought two lawsuits against most of the key principals involved in the original 2007 deal to take the company private. They include chairman Sam Zell; former CEO Dennis FitzSimons; Tribune board members past and present, including former directors Betsy Holden and William Osborn; major shareholders like the Chandler Trust; and some of the secured creditors who helped fund the deal.

Among the big banks named as defendants in the suit are JPMorgan Chase, Merrill Lynch, Citigroup and Wells Fargo & Co. Valuation Research Corp. is being sued for breach of fiduciary duty and unjust enrichment, while Morgan Stanley, which served as an adviser to Tribune's special committee overseeing the transaction, is being sued for professional malpractice.

Among other penalties, the Committee of Unsecured Creditors seeks the return of $180 million in payments to executives who sold their stock as part of the deal to take the company private.

Separately, another lawsuit was brought in November by a group calling itself the Step-One Credit Agreement Lenders (SoCal, composed of distressed debt owners Alden Global Capital, Greywolf Capital, and Arrowgrass) against JPMorgan, Merrill Lynch, Citicorp and Bank of America. Like the unsecured creditors, the distressed debt holders cite findings by independent examiner Kenneth Klee, released this summer, suggesting that the second round of funding may have been fraudulent.