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Freedom execs defend bankruptcy plan

November 19th, 2009, 5:40 pm · 13 Comments · posted by Mary Ann Milbourn

(Update Nov. 20 - The East Valley Tribune in Mesa, Ariz. reports a buyer has emerged for the paper, which Freedom had said it would close by the end of the year.)

Two executives from Irvine-based Freedom Communications Inc. today defended the company’s bankruptcy reorganization plan — which has been criticized by a former chief executive as “wicked and immoral”  — and said they expect to complete the process by June 2010.

freedom-monument-sign-cropped-lrg1“We are making progress with the effort to restructure the company through the Chapter 11 filing,” said Freedom Chief Executive Burl Osborne during a conference call with a group of Freedom reporters.  It was the first time officials at Freedom, parent of the Orange County Register, have discussed the reorganization plan since the company filed for bankruptcy Sept. 1.

Freedom filed voluntary bankruptcy after working out a prepackaged deal with its lenders. Under the plan, the banks would get  a 98 percent stake in the company in return for reducing the company’s debt from $770 million to $325 million.  Existing shareholders — members of the founding Hoiles family and two private equity firms— would get a 2 percent interest in the restructured company and the opportunity to buy 10 percent more.

The unsecured creditors committee, however, called the plan the product of  “an unholy alliance” between the banks and the current board of directors. The creditors claim they are being offered just $5 million of the $300 million they are owed.

Freedom Chief Financial Officer Mark McEachen said the plan is fair because the shareholders will get no stake if the unsecured creditors do not approve the reorganization plan.

“Everyone’s interests are aligned,” he said.

In addition, he said the $300 million figure had been misunderstood.  He said it represented total liabilities but that “less than $25 million” is owed to the unsecured creditors. (That does not include a separate $28.9 million legal settlement with Register newspaper carriers. The company contends the bankruptcy filing voided the settlement.)

“That number, that ratio of $5 million to less than $25 million is a lot better recovery than in usual recoveries,” McEachen said.

Rob Feinstein, attorney for the unsecured creditors committee, said he took the $300 million figure from the company’s bankruptcy filing.

“If the numbers work out better than that, great,” he said.

Feinstein, however, said it was unfair to give the unsecured creditors less then they are owed and then make any payment contingent on the existing shareholders retaining a stake in the company.

“Creditors are impaired all the time, but you don’t impair the creditors and give more to the shareholders,” he said.

Among the unsecured creditors are about 100 highly-compensated current and former executives and their survivors who are owed about $17 million in pension money. The company cut off those pension payments as part of the bankruptcy.

Osborne said he was sympathetic to those who lost their pensions but that such plans often are voided in bankruptcy proceedings.

“It’s not that someone at Freedom did not like this program and wanted to get rid of it,” Osborne said.

Former Chief Executive Alan Bell, who is leading an effort to recover the pension money, accused the company of needless cruelty. He said these people worked hard, believing that they would be paid pensions.

McEachen said Freedom is not currently shopping the company and has declined several offers by what he called “bottom feeders.”

The Freedom-owned East Valley Tribune in Mesa, Ariz. reported Friday that an unnamed buyer had emerged for the newspaper.  Freedom had announced the paper would be closed by Dec. 31.  Osborne and McEachen said the buyer came in with a last-minute offer that would save a “large number” of the jobs at the Mesa paper.  They said Freedom will ask the bankruptcy court to approve the sale.

The unsecured creditors committee has asked the bankruptcy court in Delaware for permission to seek buyers or to offer alternative proposals for the company.

Earlier stories on the Register and Freedom Communications ..

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 13 Comments

  • regularguy7 says:
    November 19, 2009 at 6:22 pm

    Cutting off pensions while giving shareholders a break isn’t nice but it’s legal. It may be ironic that current and former staffers are upset their retirement has been taken away while the paper wages war on public pensions. The editorial staff’s consistent message is that government should be run like a business. If that is true, government should not be run like the OCR.

  • ocobserver says:
    November 19, 2009 at 6:57 pm

    Man oh man. Talk about cutthroat. Why can’t we drop the public pensions as easily as Freedom drops theirs??? I suppose this means the former OCR carriers get hosed too, right???

    • SkippingDog says:
      November 23, 2009 at 1:39 pm

      Observer –

      Why would you want to? Are you just one of those people who get their jollies by seeing something bad happen to others?

  • steve says:
    November 19, 2009 at 6:57 pm

    maybe the banks will improve this crap bucket paper

  • JohnG says:
    November 19, 2009 at 7:19 pm

    Yep, it says so right there, the carriers got screwed!

    “(That does not include a separate $28.9 million legal settlement with Register newspaper carriers. The company contends the bankruptcy filing voided the settlement.)”

  • lwps says:
    November 19, 2009 at 7:47 pm

    Nice picture. Is it the grave stone of Freedom Corp?

  • Timothy Scavo says:
    November 19, 2009 at 8:19 pm

    Public pensions are tied to County Human Resources, the public employees union, Sacramento politicians etc. In other words, public pensions have tight knots in high and lofty places, which makes them stubbornly resistant to reform.

    Unravelling the public pension mess is really complicated compared to Freedom Communications dealing with its retiring employees. Freedom has only to go to a bankruptcy court and VOILA!

    Eh!!
    What can anyone do?

    • ocobserver says:
      November 19, 2009 at 8:59 pm

      Tim.

      Which just further drives home the point what an upsidedown society we live in. Those who are called our ‘public servants’ and paid with recycled tax dollars have virtually every competitive advantage over the ones in the private sector who generate the production in the economy that makes their paychecks and pensions possible.

      Very bizarre. The pendulum must swing back in the opposite direction. It’s gone too far.

      • regularguy7 says:
        November 19, 2009 at 11:39 pm

        This “We vs. They,” mentality in discussing pay and pensions for public employees is really getting old. If you got rid of every public employee tomorrow you would simply have to get new ones. We are still going though very tough economic times where corporate corruption, including obscene pay and benefits packages for top executives, have all been exposed. The greedy got richer not by “generating the production,” but by gaming the system and hurting our economy and society in ways our terrorist enemies could only dream of. This is the upside down world we live in and we are all in it together - public and private sector employees. There is enough division in our society without trying to build more with this stupid talk about public employees. If pensions are out of whack then lets get it fixed. You are not doing “public servants,” some kind of favor by giving them a job. The vast majority work hard for all of us and deserve everything they get.

  • JodieSanClem says:
    November 19, 2009 at 8:44 pm

    Dear Freedom Communications

    Welcome to Creative Destruction.

    Love and Kisses,
    Joseph Schumpeter

  • carguy says:
    November 19, 2009 at 9:03 pm

    Maybe if these greedy newspaper people didn’t charge the auto dealers and all the other businesses way way way too much for advertising, they wouldn’t be in this terrible position.

    All the big dealers will be dropping print advertising completely by year 2012. The internet is much less, and much more cost effective.

    I will miss the register’s 40ish cougar acct. executives that use to stroll across the showroom floor in their high heels and short skirts.

  • Who Knew? says:
    November 19, 2009 at 9:21 pm

    Freedom Corp is all about No Government and Libertarian Ideals until it serves their interest to hide behind the the court’s veil of protection and put it to companies who have done business with them in good faith, as well as taking it to their past and present employees.

    The Freedom Çorp Execs should do the right thing and resign in mass,
    with no pay outs for themselves. If they really believed in the free market, that’s what they would be motivated to do. But of course, they just talk free market, they don’t believe in it when it’s forces are going against them. No, they hide (in shame) behind the court’s protection.

    Gentleman, do the right thing, submit your resignations first thing
    in the morning.

  • OC Dem says:
    November 21, 2009 at 6:14 pm

    I love the fact that Register pensioners are bellyaching about being cut off.

    The needle is pegged on this ironometer.