Freedom execs not actively pursuing sale of bankrupt company
Freedom Communications Inc., owner of The Gazette, is not actively marketing the bankrupt company, officials said Thursday. Freedom has received no offers other than from “bottom-feeders” who in some cases want Freedom to pay them to take over a newspaper or television station, they said.
While the Irvine, Calif.-based company is not trying to sell itself, Freedom officials would “move heaven and earth” for a potential buyer willing to pay enough to satisfy the company’s debts, said Mark McEachen, Freedom’s chief restructuring officer. Any potential buyer could gain control of the company by purchasing the $770 million owed to its lenders at half price, he said. Freedom filed for Chapter 11 bankruptcy protection Sept. 1.
“We don’t believe that person exists,” McEachen said during a conference call Thursday with reporters from Freedom properties. “The company’s representatives have been instructed to bring any and all offers to buy the company to us. We have received none. We have gotten bottom-feeders interested in acquiring some of our outstanding properties for little or nothing, but those are clearly not in the best interests of all of the stakeholders. We will continue to consider all serious offers.”
Among the offers was one to acquire two newspapers in Arizona that Freedom is closing Dec. 31, McEachen said. The buyer, which he did not name, wanted money from Freedom, he said.
Freedom’s lenders, a consortium of 26 banks headed by JPMorgan Chase & Co., would end up owning 98 percent of Freedom in exchange for cutting its debt to $325 million under a restructuring plan filed last month and agreed to before the bankruptcy filing. Existing shareholders, including members of the founding Hoiles family and two private equity firms, would retain 2 percent of the company, with options to boost that stake to 10 percent.
The plan has drawn objections from unsecured creditors, which include about 100 retired executives and their survivors. Those creditors would get $5 million for claims submitted as part of the bankruptcy case. The creditors say they are owed $300 million, but McEachen said that figure is closer to $25 million. He said the figure is lower because the initial $300 million includes $100 million in deferred taxes, $100 million in pensions the company is not trying to shed and $75 million in other liabilities that have not been submitted as claims.
The $75 million includes $28.9 million for a settlement, reached a year ago, of a suit against Freedom’s Orange County Register newspaper over a claim that the newspaper’s carriers should have been classified as employees rather than independent contractors. That settlement cannot be submitted as a claim, McEachen said, because the settlement included a contract that allowed Freedom to keep the money if it filed for bankruptcy and distribute it in a possibly lower amount as part of the bankruptcy.
Freedom CEO Burl Osborne has said the company hopes to emerge from bankruptcy by June 30. Freedom officials tried to come up with a reorganization plan that was “fair to all stakeholders, including both secured and unsecured creditors as well as shareholders,” he said.
The plan must be approved by all 43 classes of unsecured creditors. If any vote down the plan, they and the company’s shareholders receive nothing if the plan is approved, McEachen said. A hearing on the plan is scheduled for Dec. 17 in Delaware.
Osborne also defended $3.75 million in bonuses paid before the bankruptcy to Freedom executives and other employees under pay-for-performance plans. He said the bonuses were needed to “make sure people are motivated during a very difficult time” and that creditors are supportive of creating incentives for performance. He said employees who have been with the company at least three months are eligible for such payments. He said $1.1 million was paid to former Freedom CEO Scott Flanders as a “contractual obligation.”
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