Luken announces plan to exit bankruptcy

photo Matt Winn, right, vice president for Luken Communications, talks about the company's expansion of broadcast television offerings as they bring back The Nashville Network this fall. Tripp Taylor, left, director of sales, listens to the explanation.

Luken Communications TV Networks• Retro TV• The Heartland Network• The Family Channel• TUFF TV• PBJ• Frost Great Outdoors• Jewelry Television• CarTV (coming soon)Source: Luken CommunicationsTV Shows• Beverly Hilbillies• Dr. Who• Mystry Science Thearer 3000• I Spy• Rick & Bubba Show• Crook & Chase• Bob Vila• Buck Rogers• The Adventures of Ozzie and Harriet• Dog the Bounty HunterSource: Luken Communications

After years of court battles, Luken Communications has settled with Arkansas bankruptcy trustee M. Randy Rice for $2 million, well short of the record-breaking $65.9 million penalty Rice had sought.

Rice alleged that millionaire Henry Luken underpaid for the TV assets he purchased from another company, Equity Communications, which was forced to later seek bankruptcy protection.

Luken paid $18.5 million in 2008 for the Equity's Retro Television Network, which the Chattanooga millionaire grew into six networks and about 100 TV stations covering 80 percent of all U.S. households, one of the largest holders of broadcast spectrum in the country.

Rice maintained that Luken should have paid closer to $115.8 million, and a jury agreed, though Luken Communications continued to lose more than $300,000 per month as of July.

The bankruptcy fight spread from Arkansas to Tennessee when Luken Communications itself declared bankruptcy in response to the penalty, claiming that it was unable to immediately come up with the cash. While it created a plan to deal with the sudden penalty, Luken appealed the Arkansas verdict.

Luken Communications' plan was to push a proposal in which it would pay all other creditors except Rice, who would only be paid when all appeals on the $65.9 million verdict were exhausted, according to Rice's proposed settlement.

Rice estimated that under such a scenario, he would only stand to earn about $1 million, minus the expenses of a complicated and lengthy legal battle.

The $2 million settlement, which was approved by U.S. Bankruptcy Judge Audrey Evans, allows both sides to avoid a protracted court fight, and allows Luken Communications to return to business as usual, officials said.

David Leach, president and CEO of Luken Communications, said the company will emerge from Chapter 11 bankruptcy protection in October, after the U.S. Bankruptcy Court in Chattanooga signed off on the company's remaining debts.

"We have been very fortunate to have vendors and affiliates who have stuck by us while we resolved what Luken viewed as an unjust verdict," Leach said. "We appreciate the support of our affiliates, vendors and employees during this difficult time and look forward to continuing exceptional growth."

Luken said he intends to finish paying the company's creditors before announcing any further plans.

Contact staff writer Ellis Smith at 423-757-6315 or with tips and documents.