Freedom Communications files for Chapter 11 protection
January 2016 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING
Financier Worldwide Magazine
Beleaguered newspaper publisher Freedom Communications Inc. filed for bankruptcy protection following a struggle with debt and an inability to meet its financial obligations.
Santa Ana-based Freedom, which owns the Orange County Register and Riverside Press-Enterprise, filed for Chapter 11 reorganisation in the US Bankruptcy Court’s Central District of California.
Freedom’s Chapter 11 bankruptcy case involves two dozen legal entities with roughly $100m in debt according to William Lobel, Freedom’s bankruptcy attorney. Among the major creditors are the business lender Silver Point, owed $22m; former owner Angelo, Gordon & Co., owed $17m; and pension regulator Pension Benefit Guaranty Corp., owed $15m. “The filings should preserve more than 1000 jobs and ensure the operation of an Orange County institution,” said Mr Lobel.
At the same time, a management-led plan to reorganise the company’s finances and assume ownership of the struggling newspaper company is being overseen by Rich Mirman, Freedom’s CEO and publisher, along with other local investors. Mr Mirman assumed the day-to-day leadership of Freedom on an interim basis in October 2014 before becoming CEO six months later.
Thus far, few details have been released on the local investor group that wants to acquire Freedom’s assets although, in addition to Mr Mirman, the group is believed to include developer Mike Harrah, who purchased the Orange County Register’s headquarters for $27m last year.
“I am confident our bid will be successful, and the company will emerge with a solid financial foundation and well-positioned for future success,” wrote Mr Mirman in a letter posted on the Freedom website. “The goal is to strengthen our position as the leader in providing local news and information for Orange, Riverside and San Bernardino counties.”
Mr Mirman and his associates hope the Chapter 11 bankruptcy, Freedom’s second filing in six years, will retool large debts incurred since Boston investors Aaron Kushner and Eric Spitz bought the company three years ago. However, according to media consultant Alan Mutter, Kushner and Spitz made a mistake by emphasising print rather than digital at a time when readers were increasingly turning to online news. “There was all these sort of shoot-from-the-hip initiatives that puzzled everybody that thinks they know anything about the state of the newspaper business,” said Mr Mutter.
Should the plan detailed by the local investor group be given the go-ahead by the court, Mr Kushner’s ownership stake in Freedom would come to an end while Mr Spitz would remain as an investor and company chairman. Mr Mirman though is aware that others could emerge as bidders, including Tribune Publishing, owner of the L.A. Times.
“There’s always that chance (of being outbid),” said Mr Mirman. “It’s the court’s obligation to seek out the highest bid.” In terms of the potential interest of Tribune Publishing, Mr Mutter said: “Tribune has made acquiring newspapers in nearby markets a stated goal; in May 2015 it purchased the San Diego Union-Tribune and, with The Times, formed the California News Group. I always thought it would be a possibility that the Los Angeles Times would want to integrate all the papers from L.A. to San Diego.”
Despite the level of uncertainty, Mr Mirman is keen to stress that the Chapter 11 bankruptcy case will have no impact on the day-to-day operations of the newspapers and that advertisers and subscribers will not be adversely affected by the reorganisation.
“Staffing will remain steady and payments to employees, key vendors and partners will continue,” insisted Mr Mirman. “The company expects to turn a profit in 2015 after losing $40m-plus in the previous two years. Having gone through a few rocky years we need to redefine ourselves by turning the page and starting a new chapter.”
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