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Freedom clears first bankruptcy hurdle
October 14th, 2009, 4:44 pm · 21 Comments · posted by Dena Bunis, Washington Bureau Chief
WILMINGTON, DEL. A federal judge ruled today that Freedom Communications can draw on the cash it needs to continue operating its newspapers and television stations while its preplanned bankruptcy case makes it way through the courts.
The ruling by Judge Brendan Shannon denied claims by the unsecured creditors of the company who contend the deal struck by Freedom – the parent company of the Orange County Register – is a giveaway to the banks.
The creditors meanwhile would get a couple of pennies for every dollar they’re owed.
Had the judge ruled the other way it could have jeopardized the bankruptcy plan pre-agreed to by Freedom and its bankers.
Freedom Chief Financial Officer Mark McEachen outlined for Shannon the budget the company has structured and why it needs to draw down on the money from its lenders in order to keep the company afloat during the bankruptcy process.
After a day-long hearing, the judge said he is convinced that Freedom has “no other sources of cash readily available” and agreed to keep the current plan in place.
Robert Feinstein, the attorney for the unsecured creditors committee, said he didn’t believe the company would have to shut down if the judge denied the motion and allowed the creditors to look more carefully at this deal.
“The debtor (Freedom) has made a horrible bargain’’ Feinstein said.
The aim of the creditors committee is to find some way to squeeze more than the proposed $5 million for its members by the time this bankruptcy proceeding is complete. As a group those creditors are owed more than $300 million.
Feinstein objected strongly to a so-called “no shop” provision in the agreement that gives Freedom access to a steady cash flow. That provision, he says, precludes Freedom from finding other buyers than the banks to get it out from under its financial troubles.
Freedom filed voluntary bankruptcy on Sept. 1. At the time Freedom owed the banks $775 million. Under the bankruptcy, the lenders will forego $450 million and take control of the company in return, leaving the reorganized company with $325 million in debt.
In his testimony, McEachen said that there are no suitable suitors looking to strike a better deal for Freedom.
The CFO said the company had gotten inquiries from “bottom feeders,’’ who offered to buy some of Freedom’s 50 properties for “low prices.”
Feinstein, however, insisted that if Freedom were truly pursuing a high-end buyer, that perhaps better offers would be forthcoming.
The creditors’ attorney also lashed out at the Freedom board for approving the bankruptcy plan, saying “they are acting out of self-interest.’’
Under the terms of the plan, current owners, including members of the founding Hoiles Family and investors Blackstone Group and Providence Equity Partners would keep a 2 percent stake in the new reorganized company. And they would be able to purchase up to 10 percent more. Typically, such former owners would go to the back of the line behind all existing creditors if the unsecured creditors had not been paid in full.
Shannon adjourned today’s hearing until Friday when the two sides will argue another motion by the creditor’s committee that would keep Freedom from paying $7 million in bonuses and severance to employees during the bankruptcy. That money is earmarked to pay everyone from top executives to rank and file employees under a variety of bonus plans.
Earlier stories on the Register and Freedom Communications ..
- Freedom Communications faces first major bankruptcy hearing
- 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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Liberal slim-balls doing what liberal slim balls do best Spending other peoples money.
that’s rich Sparky. how much money did Pubbies spend on our wars? Billions? Trillion? who’s paying for that? oh that’s right….. you and me with our taxes.
(and Libs ain’t doin’ much better)
both of those “Liberal’s” should be capitalized. There is a difference between a classical Liberal, in Freedom’s sense and a liberal as in other media outlets. Look it up, you may be enlightened.
What is a slim ball?
I’d like to make an offer on the Register and its 49 affiliate newspapers…
$800 Million plus Cherokee Indian Minority-owned (Broadcast/Media property) Tax Credits…
and, Wouild you take a water-hydrogen fuel patent as part of the deal?..
harry
WELL, this explains why the stories are so “professionally” written!
The whole thing is sort of funny since Freedom Communications was started by a strong libertarian which believes in personal rights to liberty and life but no property. Strong believers in the free capital market. Yet when the market turned against them they are now supporters of bankruptcy. LOL
THANK GOODNESS!
Who else would hire Mrs. Sforza?
It would appear to me that the OC Register’s, The Watchdog, is living in a glass house and throwing stones. Finding “dirt” among the OC Sheriff’s Department, MWD, etc., while in the background, Freedom is looking to pay bonuses during bankruptcy. The pot calling the kettle black.
I think there is a difference between public and private funds….correct me if I am wrong
I agree, especially when they’re barely going to pay creditors 2 cents on the dollar. 2 cents!!
I’m going to call up and tell the customer service I don’t want to pay $14 for my subscription anymore, but will gladly give them $0.28. that ought to be enough.
The free market haha libertarian morons, can’t run a business…
Is this case with the pre-agreed to Plan another Chapter 11 bankruptcy abuse, that Congress continues to ignore?
I spent my whole budget on 3 newspaper ads and nobody responded! Now I’m on a corner twirling a sign!
Well there goes my evening crossword puzzle …
I’m not a judge but common sense tells me that a company should pay its creditors first in a bankrupcy before they pay discretionary things like severance and bonuses. Thats sort of like if I filed for bankrupcy but wanted to take a vaca to France instead of paying a contractor who just remodeled my kitchen!
Here’s a suggestion for the OC Register:
Invest in seasoned serious Journalists.
The current staff has elementary skills in English, and even less professionalism in investigation.
The OC Register is a very shallow small town backwater newspaper out of touch with the County it represents.
Joseph-You are correct, of course, regarding public and private funds. Either way, we pay. I have often wondered who watches the watchdog in any newspaper. Surely, there is just as much controversy regarding pay for CEO’s and consultants in the media world. My point was, any company that pays or wants to pay bonuses while filing for bankruptcy, should look closely within before pointing fingers.
“Bottom Feeders” - wow!
Freedom declared bankruptcy days before the payments on the lawsuit the lost were meant to start and have fired hundreds of people.
Yet every manager at freedom is waiting for their big bonus checks to be cut in the next week or 2. Would that mean that Deputy editors could take home about $25k and Brusic would double his salary? Who knows what the CFO’s Bonus is? My guess - over $100k.
Perhaps that crack investigative team should find out.
The only Bottom feeders here are the Freedom and OCRegister management team - they should be ashamed.
I was a carrier for the Register, I wonder if the JUDGE WOULD LIKE TO KNOW THAT THE CHANGED MY DEPOSITION PLUS NUMEROUS OTHERS (ESPECIALLY THE ONES THAT COULD NOT REALLY UNDERSTAND ENGLISH) AND USED MY SIGNATURE IN THEIR FAVOR. I BALKED AT THAT AND THE ATTORNEYS THAT TOOK MY FIRST STATEMENT WERE FIRED, THEN THE 2ND SET OF ATTORNEYS WERE FIRED FOR ORDERING DOCUMENTS TO BE DESTROYED, THIS IS ALL FACT.
FREEDOM COMMUNICATIONS IS CORRUPT, THEY COMMIT FRAUD, DESTROY EVIDENCE,
I WILL NOT AGREE TO ANY SETTLEMENT FOR LESS THAN WAS AGREED TO AND I WILL BE MORE THAN HAPPY TO PRESS FRAUD CHARGES
It was all in the works while the law suit was going on. I now work for an insurance co. and while there I started asking questions in reference to claims and what would happen if an accident happened while delivering newspapers, THE CARRIERS ARE NOT COVERED PERIOD, I went back and informed the management and was told to keep my mouth shut and that the carriers did not need to know.
The FACTUAL reason the lawsuit came about is that one of the carriers was involved in an accident and the register left the carrier out to dry.
The company is so crooked, a carrier was murdered during her route and they supposedly charged her estate as the managers had to go out and finish delivering her route as she did not have a back up to finish, another carrier died of a massive heart attack, the register charged the estate, again as the carrier did not have a back up right then.