(Correction: It is unclear whether Blackstone Group and Providence Equity Partners, two minority shareholders in Freedom Communications Inc., will retain an interest in the company after a restructuring with the banks of its $700 million debt. Because of a reporting error, their future ownership was previously mischaracterized in an earlier version of this item.)
Burl Osborne became interim chief executive of Irvine-based Freedom Communications Inc., parent of The Orange County Register, after former CEO Scott Flanders left to head Playboy Enterprises June 30. Osborne steps in at a difficult time for the company, which is laboring under a $700 million debt and is in deep discussions with its bankers about restructuring. He sat down with the Register last week to talk about the company and its future.
Burl Osborne
Q. What does a restructuring entail?
A. “What happens is a certain amount of the debt — a large measure of debt — is exchanged for equity held by existing shareholders … The bank groups then take control of the company. They assign a new board of directors and hire their own CEO.” Members of the founding Hoiles family currently are the majority shareholders of Freedom. Two private equity firms, the Blackstone Group and Providence Equity Partners, are minority shareholders.
Q. What does this specifically mean for Freedom Communications and the Hoiles family, which has owned the Register since 1935?
A. “Negotiations over an agreement are underway. We are hopeful — though one can’t be certain of anything — that the family will retain some minority ownership of the company. This is a very emotional time for people whose history is bound up in this company. I hope to accomplish this in a way that is least painful to them as family ownership.” It is unclear whether the private equity shareholders will retain a minority interest.
Osborne said the process could take several courses. “It is possible to have a consensual agreement that is executed out of court, and it’s possible to have it done under court supervision … If the bank group did not all agree, then it could go into Chapter 11 bankruptcy reorganization in a consensual filing, but it does not mean the company is bankrupt.”
Q. Many stories have been written about some newspapers losing money. Is the Register going to close?
A. “Although many papers are losing money, because of the very painful steps that have been taken (at the Register), the newspaper is profitable … The newspaper is not losing money but its profits are greatly diminished … The newspaper is not going to go under.”
Q. When the banks take over, what happens to the Register’s long-held libertarian philosophy?
A. Osborne doesn’t expect the banks to make any change. “You don’t want to fix something that isn’t broken.”
Q. You call yourself interim CEO with a capital “I.” How long do you expect to be leading the company?
A. “I’m interim — this is a temporary assignment …I came into this with the understanding that when the restructuring is completed and executed and the new Freedom emerges, then the existing board and ownership will decide on who should be the next CEO.” Osborne said he expects the outline of a restructuring to be ironed out in the “next several weeks” and the final transfer of control to take place a few months later.
Burl Osborne at a glance
Title: Interim chief executive of Freedom Communications Inc., parent of The Orange County Register
Age: 71
Residence: Dallas, Tex.
Background: He has spent a half-century in the newspaper business including a 20-year stint at AP, where he rose to managing editor. He joined the Dallas Morning News in 1980 as executive editor, became publisher in 1986 and is widely credited with making the paper into one of the best in the country. He retired from Belo Corp., the Morning News’ parent company, in 2001. He has served as an independent director on Freedom’s board since 2004.
The OC Register profitable? Maybe because they keep running the same stories over and over again. It’s more like a tabloid than a newspaper. It creates controversy to get the viewers reactions. Nothing really newsworthy at all.
At one time it was worth paying for home delivery. It covered the news. Now, all you get is maybe 15 pages if you’re lucky. How can it be making money?
You are better off reading the NY Times or Washington Post if you’re looking for the lastest news happenings around the world.
The Register, like a lot of newspapers, is teetering on the verge of disaster. Newspaper ad buys are projected to be down anywhere from 12 to 20 percent for 2009 and into 2010. The only future newspapers really have is right here on the internet. Instead of restructuring debt, perhaps the OCR should be looking into how transition its business from old-school hard copy to online.
Why is that print media is so reluctant to face the facts that print media is a dead industry as is the book and magazine industry. In ten years from now tablet readers will be common place. You want news? Download to your tablet. Whant to read a book? Download it to your tablet.
Good friend of mine worked at the Times in LA. Was there most of his workng life. I told him years ago that the newspaper industry is dead but he refused to listen. He just got laid off and is frantically looking for work. Guess what, no one wants a newspaper guy in his fifties.
That’s what you say about your so-called good friends? Glad I’m not one of them…
“The newspaper is not losing money but its profits are greatly diminished … The newspaper is not going to go under.”
If that is the case, then why did you have 2 layoffs, quarterly mandatory furloughs and now implementing a 5% pay cut to all employees all within a few month period to date? Another article I read also stated a $70 mill debt?
Sounds like the company is sinking its ship…just slowly and painfully for the employees who are working their tails off just to keep their job in a dying industry. Talk to your coporate payroll in Irvine and get the real picture!
Move to OC says: “If that is the case, then why did you have 2 layoffs, quarterly mandatory furloughs and now implementing a 5% pay cut to all employees all within a few month period to date? Another article I read also stated a $70 mill debt?”
Most companies that report profits also carry debt. In business, one tries to earn more with money than the cost of credit. If that weren’t the case, banks would never lend to businesses.
The Register and other Freedom holdings have used layoffs, furloughs and pay cuts for the same reason nearly all industry in this country, along with many state and local governments, have resorted to these measures: The economy has tanked and our growing unemployment is at a 26-year high. The owners are legally required to maintain a specific level of profits, just like the owners of nearly any other business that uses credit. Many other companies in media, banking, construction, law, accounting, etc., etc., have been unable to stay in business, much less maintain profits, in this economy.
The parent company’s debt is $700 million only because the remaining partners bought out other partners before the recession. You should commend owners, management and employees of Freedom Communications for weathering this storm better than the vast majority of their peers working for competing media companies. Had management declined to engage in difficult cost-cutting measures, several of these newspapers might be on the verge of extinction and none of the employees would have the opportunity to work their tails off.
Wayne Laugesen
editorial page editor
Colorado Springs Gazette
Well I guess this means that when they were crying the blues before it was only while they were trying to stiff the newspaper carriers out of their pay. Now that the case is settled they are able to work things out. What a surprise!
Though on an individual and personal note, I hate to see any lose jobs especially during these difficult times, I nevertheless am compelled to say — Here’s hoping Freedom Communications and their divisive propaganda die a quick death and an owner who values community over ideology steps in.
I’m curious to know where those would would bid newspapers a hasty adieu believe they will be getting their news, should that happen. News doesn’t write itself. Government workers doing illegal things don’t write up a convenient synopsis of their activities and post it to everyone’s email address. Your city council members won’t personally call you on the telephone to tell you that they just voted against improvements for your street. Without a paid newsgathering staff, you have none of that information. There is only so much time in your local television news program, and CNN couldn’t care less if the waterline breaks on my street.
I do not want to live in a city without a local newspaper, even one that espouses a political philosophy with which I may not agree.
OCR publisher T Horne says that he’s told by his “marketing folks” that print and online combined readership of the paper is at an all-time high.
How reassuring to know that it’s not a readership problem. Rather, it now finally appears that it’s, indeed, the outcome of a very foreseeable revenue problem.
Sadlly, it’s been exacerbated over the past three-plus years by a dilettante self-important ex-CEO, silo-entrenched board members,and syncopathic print and broadcast division “thought-leaders” who repeatedly cooked-up and delivered top-down over-optimistic financial forecasts as part their pathological need to save their own skin while doing their daily bidding of Blackstone and an out-of-touch, entrenched, and entitled familial class.
The real tragedy, in my opinion, is that Freedom did not incubate a culture of internal truth-tellers. The short-term annual focus was always to gin-up revenue forecasts that were in-synch with the debt-service to the investors at Blackstone, but out-of-touch with market revenue realities. Therefore, no meaningful effort was extended to forecast financials soberly.
What do SEC rules say about overly optimistic financial forecasts?