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Freedom Communications faces first major bankruptcy hearing
October 13th, 2009, 6:01 pm · 43 Comments · posted by Mary Ann Milbourn
Freedom Communications Inc., the parent of the Orange County Register, heads into bankruptcy court Wednesday for its first major duel with its unsecured creditors.
At issue is a series of motions that could determine the course of the case and how much, if anything, the creditors ultimately get paid.
The unsecured creditors are angry because the proposed plan lays out a five-month, fast-track process that would give Freedom to the lenders in return for access to the lenders’ cash during the course of the bankruptcy. The plan gives the unsecured creditors, who together are owed more than $300 million, just $5 million — less than two pennies on the dollar.
At the same time, the plan allows the current owners, including members of the founding Hoiles family, to retain a 2 percent stake in the reorganized company and warrants to purchase up to 10% more. In a typical bankruptcy, existing shareholders are wiped out if unsecured creditors get less than they are owed.
In addition, the creditors committee objects to the fact that some creditors, “hand-picked” by Freedom, would get paid in full while the majority of general unsecured get “single digit cents on the dollar.” And if the creditors don’t agree to the plan, they will get nothing.
The creditors called the plan “economically draconian.”
Freedom, in a terse five-page response, basically said its motion and proposed plan is not anything out of the ordinary and should be approved by the court.
Richard Marshack, a bankruptcy attorney with Marshack Hays LLP in Irvine, said the company is using its lenders and the threat to cut off cash to speed up the case.
“What they’re (the secured lenders) saying is, ‘Since you’re using our money to keep the company afloat, we’re only going to give you a limited amount of time to use our money to keep the company afloat.’” Marshack said.
Lynn LoPucki, a UCLA law professor who is an expert on bankruptcy, noted the plan to let the current shareholders retain a stake violates the absolute priority rule, which gives legal preference to creditors. The lenders, however, could deem both the new 2% stake for the shareholders and the $5 million for unsecured creditors as “gifts” which are allowed.
Among the unsecured creditors are 5,000 newspaper carriers who sued the Orange County Register, claiming the newspaper improperly classified them as independent contractors instead of employees. The Register agreed in a settlement last November to pay up to $22 million to the carriers and placed $28 million in an escrow account to be paid out Sept. 14.
Freedom, however, took back the money after filing for bankruptcy on Sept. 1, claiming that since it didn’t have to be paid out until Sept. 14, it was rightfully part of the company’s assets and should be included in the bankrupcty.
The creditors also include some senior retired executives, including former Register publisher and Freedom chief executive R. David Threshie and former Freedom CEO Alan Bell, whose retirement agreements were terminated.
Hoping to recoup some of their money, the carriers, the retirees and the other unsecured creditors are opposing Freedom’s request to pay $7 million in bonuses and severance during the bankruptcy.
The creditors argue Freedom “craftily engineered” a plan to reward its 50 top executives to the financial detriment of the carriers, retirees and other creditors.
Freedom said the bonuses are not just for senior executives. A pay for performance program also included 2,950 other employees. After so many job cuts at the company the company said the severance program helps with morale.
“The debtors seek to continue the bonus and severance programs because they are essential to their ongoing viability,” said Freedom.
Freedom entered voluntary bankruptcy Sept. 1 with the agreement of its lenders. At the time the company said it had $757 million in assets — now worth “substantially less than that amount” — and $1.077 billion in debts. The biggest debt by far is the $770.6 million the company owes to its lenders.
Register staff writer Ron Campbell contributed to this report.
Earlier stories on the Register and Freedom Communications ..
- Creditors accuse Freedom of being too secretive
- Freedom Communications tries to keep bankruptcy documents secret
- Register’s parent files for Chapter 11 bankruptcy
- Q&A: What bankruptcy of Register’s parent means
- Register parent in talks with its lenders
- Register’s parent enters critical phase of bank talks
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As I am one of those “angry” creditors, I would like to say that angry doesn’t begin to describe it.
Obama will give them a stimulus package like he did for the rich bankers and the auto unions and everyone else that gave him campaign money
What a maroon!
Yea, let’s blame the victims for the actions of the agressors & blame President Obama for it too! Here we have Freedom Communications, a very conservative organization that has decided to shaft it’s creditors and reward it’s executives and you are out there teabagging about President Obama.
It sticks in your craw, doesn’t it? President Obama….Can you say it for the next 7 1/2 years? We can & will be.
I second that emotion.
Freedom knew all along when they settled the class action case that they were going to file chapter 11.
wow…they should seize operations and close the puppy down.
Freedom expouses the Libertarian idea. of letting the market run its course without interference by the government. Now the market is close to sealing their fate and they want the juidicial arm of the government to take action to protect them from their own failures. How hypocritical.
hah.
You speak the truth and expose the hypocrisy, Sean.
Thank for the laugh.
The libertarian economic philosophies pushed by the OCR only apply to the other guy.
Funny.
The essence of converatism is rationalizing greed and narcissism.
The essence of glibertarianism is both rationalizing and celebrating greed and narcissism.
What you are witnessing with regards to the OCR bankruptcy is a feature, not a bug of their philosophy.
Good luck Bill
As a loyal subscriber and believer in the libertarian values that the O. C. Register once stood for I am appaled that the governing Board would seek to unfirly profit at the expense of its long time loyal former employees who rely on their pensions for their day to day needs. Equally appaling is “Freedom’s” manipulation of the low level carriers that worked 24/7 to deliver a paper to my door and the doors of my neighbors. Freedom and the Banks that control it should be ashamed of their greedy pursuit of the Almighty Dollar at the expense of all else..
The only person at the Register that i commend is the author of this article. I am sure this took a great deal of courage.
I’m a little confused.
You claim to be a “believer in the libertarian values that the O. C. Register once stood for,” yet feel “it should be ashamed of their greedy pursuit of the Almighty Dollar at the expense of all else.” Isn’t the pursuit of the almighty dollar at the expense of everything else the core libertarian value? Just ask Ayn Rand.
EXACTLY
Im angry to because I’m one of the creditor that got screwed so we won’t see our settlement money at all
Freedom needs to move on, dissolve itself and sell its assets , including OCR
The paper really should be shut down. The paper prints loads of disinformation and propaganda. The county is flooded with illegal alien criminals raping, robbing and killing but not a word about the problem. The Register writes an article about how it’s important to shut down massage parlors because someone may be paying for sex behind closed doors of a private business. There’s always the articles about how the job market is improving and housing is going up every week. Any business that tells constant lies, I would expect them to try to cheat people out of money as well.
I am with you, Dorian. Very well written.
I concurrrrr
All good points, Dorian.
You are one sharp lady.
Only a board of directors chock full of rich people would get this type of treatment. It’s absolutely unbelievable that they couldn’t manage the company to keep from losing money, have to file bankruptcy, but still get to retain 2% and are going to be allowed to purchase up to 10% when they can’t even pay their bills and are screwing everyone in the process.
How can I get one of these deals? Oh that’s right, you have to be rich first and get preferential treatment.
Wishful thinking on everyone’s part, that the OC Register will shut down. I don’t see that happening, at least not in the immediate future.
If it ever does shut down - I said IF, not when - but if it ever does, I don’t think it will happen in the next year or 2. Lots of businesses file for and get bankruptcy, and they don’t shut down.
Also, creditors everywhere have been squeezed into a corner. They may whine and moan, but they have to take whatever pittance they can get. These are tough times.
Scavo,
What the OCR does and did is inexcusable. Read the prior posts.
And apologists like yourself should be asshamed. You don’t value the principles upon which my beloved nation was founded. You favor the OCR demanding that everyone else live by libertarian economic principles which they hose the ones who they owe money to into the ground!
hah.
Hypocrites. All of you.
ocobserver,
So now I’m an “apologist” for the OCR?
Are you eating sour grapes, just because your profile page was blocked on the Comments Board?
Sure sounds like sour grapes to me.
For your information, ocobserver, I NEVER, NEVER ONCE defended or favored the OCR’s actions in bankruptcy court. All I said is that this is a hard reality for creditors in this recession, and that if the OCR goes belly-up, it won’t be any time soon. And that’s all I said.
Maybe the hyprocrisy that you’re so exorcised about doesn’t lie with me, Sir …….
i hope freedom and ocr go down in history as a loser. burn baby burn!
I hope the Capistrano Dispatch is the next to shut down.
Good! I hope the courts close them down. Some of the contributing writers to this paper screamed very loudly when GM and Chrysler filed and demanded that the creditors come first…WELL, WHERE IS YOUR SCREAMING NOW FOR THE FREE MARKET TO RULE NOW? Karma! Ain’t it grand!
Obama will give them a stimulus package like he did for the rich bankers and the auto unions and everyone else that gave him campaign money.
Broken record maroon!
If the paper were not so pro-criminal it might not be in this mess.
hey caseclosed.that was bush that signed tarp into law.History revisionism never works.
Keep pandering to all the gang bangers and criminals OCR….its really helped your paper.Fire each and every one of your digusting biased liberal reporters…..and start over!
The Register is arguing that all of its matters are confidential and should not be disclosed to the public.
That is an odd position for a newspaper to take because it always argues that the public has a right to know while it exposes everyone else’s private matters to the public .
Their name should not be “Freedom Communications”, but “Hypocritical Communications”
Bonuses for all, except the creditors.
The Register wants to pay $7 million to the top employees. Nothing to the bottom 2,500 employees. What makes that worse is this is a bonus for performance!! It is in bankruptcy, good job.
Even worse the money is coming from moniies promised to retirees that can no longer earn a living and from monies separatly ordered to be paid to the carriers that delivered the papers to the doors of all subscribers for their past productive work, which amount the Court said should have been paid before.
I still can’t believe that the Register wants to pay bonuses to their insiders and intentionally screw their employees under the guise of giving bonuses to employees.
Hypocritical Communications Strikes Again.
Here is a shocker: I just checked the hard copy paper to see this Article.
Guess What:: It is not there
Looks like the Editor (meaning the Board and the Banks) got to it.
Hypocritical Communications stikes again
I am the editor of this story. The information for us to write this post came too late for our print deadline but the report on what happened in court in Deleware today will be in print tomorrow. I know conspiracy theories are popular but in this case it was a simple matter of timing and deadline. Thanks for reading.
I look forward to reading it. I am curious how you will handle the :
1) $3 Million paid to J.P. Morgan on the morning of the filing of bankruptcy; or
2) the Board’s decision to let the 90 days lapse to collect the $162 Million JP Morgan took in April of 2009.; or
3) the $965 Million that the Board saddled the Company with and paid to the insiders in 2004. Giving the Company no benefit but putting it in the fragile position that is in today leading to its bankruptcy.
Yes, I am curious to see how you cover the story!!
Freedom’s just another word for “Up yours, Jack - I’ve got mine.”
This story was reported with the same bias slant attitude that put the company in trouble in the first place, a load of hog wash, just report the truth, the newspaper owners are trying to weasel out of paying what they owe by the same route they’ve taken while ruining the once OK OCR, which by the way is the same route Washington is on, a route filled with pot holes, pot heads, muggers, and thieves that would kill you for a hat band, and the vehicle their in is a giant bus packed with people inside out hanging on the sides and on the roof not unlike the ones you see in third world countries, and the bus driver is a liberal.
Only the “little people” should suffer bankruptcy……the wealthy get a free pass…..(and the worse their performance, the bigger their bonus)
Retired and Broke
Hard-hit by the recession, today’s 55-and-over crowd is the age group most likely to declare bankruptcy.
By Linda Stern | Newsweek Web Exclusive
Oct 14, 2009 http://www.newsweek.com/id/217539
Hey Gallego what about the fact that the OCR reporters write slanted, biased anti white people stories.The paper did not take into account that its the hated whitey that BUYS the newspapers.Going broke sucks!
They made employess take 40 hrs furlough, they have laid off folks, they have cut employees pay rate by 5%, each time one of this decisions were announced they lead you to believe that it was only to pay off the loan for the buyout. After employees pay was cut, then they announced they had file bankruptcy. The pay didn’t have to be cut, they already knew they would file. Liars all of them, the little people have suffered, not the family, the family has ran the company into the ground, do I feel like the family has suffered NO, even when furloughs were announced, it was even said that top executives would take furloughs, big deal Im sure it didn’t hurt their income, like the little people. Story dated 10/16 says McEachen stand to get $300,000 in bonuses WHY, know I really know why pay was cut, the family doesn’t deserve anything, the reason Freedom is in the mess they are n is because of the family, the greedy little family.