Granite Broadcasting U.S. Trustee ordered to appoint examiner

By Caroline Salls

Pittsburgh, Feb. 20 - Granite Broadcasting Corp.'s U.S. Trustee obtained court approval to appoint an examiner for the company's bankruptcy case, according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to the order, the examiner will investigate the perfection, validity and enforceability of the liens securing the company's secured notes, term loan a and term loan B; whether the company and its officers and directors discharged their fiduciary duties in negotiating and entering into the term loans and a restructuring support agreement; and any claims against any third parties, including avoidance, insider status, equitable subordination and recharacterization.

The examiner's report addressing each investigation area must be filed by 5 p.m. ET on April 2.

According to the motion, the company's insiders and Silver Point Finance, LLC pre-negotiated Granite's plan of reorganization, which the U.S. Trustee said "provides substantial benefits to those very same insiders who not only negotiated the proposed plan, but negotiated provisions of that proposed plan that greatly inure to their personal benefit."

The U.S. Trustee said she was unable to form a committee of unsecured creditors, and, although three preferred equity holders have asked U.S. Trustee Diana G. Adams to form a committee, the stock is not widely held, a significant percentage of it is held by entities that have been representing themselves zealously in these cases, and some of these entities either negotiated this plan or may present some type of alternative.

"In the absence of the appointment of an examiner, confirmation may occur without review of the board of directors' conflict of interests, Silver Point's control and actions, avoidance actions, or valuation," Adams said in the motion.

"Based on the facts of this case, these issues merit investigation before confirmation."

Granite, a New York-based owner and operator of network-affiliated television stations, made a prepackaged Chapter 11 filing on Dec. 11. Its Chapter 11 case number is 06-12984.

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