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Freedom Communications Inc., owner of The Orange County Register and The Press-Enterprise, filed for bankruptcy protection Sunday as part of a management-led plan to acquire the struggling newspaper company.
Rich Mirman, Freedom’s CEO and publisher, along with other local investors, filed in U.S. Bankruptcy Court’s Central District of California to reorganize the Santa Ana-based company’s finances and assume ownership. Mirman, already a Freedom investor, took over day-to-day control of the company a year ago.
Mirman and his team hope the bankruptcy, Freedom’s second filing in six years, will retool large debts incurred since Boston investors Aaron Kushner and Eric Spitz bought the company three years ago. The plan would end Kushner’s ownership stake in Freedom; Spitz will remain an investor and company chairman.
Mirman said he expects the bankruptcy case to have no impact on the day-to-day operations of the newspapers. Staffing will remain steady. Payments to employees, key vendors and partners will continue. The company expects to turn a profit in 2015 after losing $40 million-plus in the previous two years, Mirman said.
“We’re turning the page and starting a new chapter,” Mirman said. “We’ve gone through a few rocky years and we need to redefine ourselves.”
When Kushner and Spitz took over in July 2012, they stunned an ailing and shrinking newspaper industry. Their bets were heavy on print products. They expanded newspaper sections, added magazines, bought The Press-Enterprise for $27 million in November 2013 and launched the Los Angeles Register in April 2014. In addition, they dramatically increased subscription costs, de-emphasized Web publishing and put up one of the industry’s hardest online paywalls.
Few of those strategies paid off. As losses mounted, the owners turned to layoffs, buyouts and staff furloughs in 2014. The Los Angeles Register folded after five months.
Mirman, a veteran casino marketing executive, took over day-to-day leadership on an interim basis in October 2014 and became the top executive of Freedom and the two newspapers six months later. He said what started as simply a financial fix-it job for him has morphed into a passion to create a profitable and sustainable news operation. He now lives in Irvine.
“I’ve caught the bug of what news journalism can do in its community,” Mirman said. “I’m very intrigued by translating what we do into a long-lasting business. There are ways to make money in new and innovative ways.”
The bankruptcy move is not without risks. Numerous business decisions require court approval. The company gains relief from paying creditors, but those same creditors can wield some power in the process. There’s no guarantee the so-called stalking horse bid by Mirman and his investment team – which includes Michael Harrah, owner of the Santa Ana-based development firm Caribou Industries – will win the bankruptcy auction, which may be held within 90 days. (Harrah purchased the Register’s Santa Ana headquarters in 2014.)
Mirman would give only scant details on his bid, saying it involves investors paying cash, assuming certain debts, and retaining and financially maintaining the employee pension program. The full bid will be revealed in the bankruptcy process.
Mirman said he thinks his bid has a good shot, but he’s keenly aware that others – such as Tribune Publishing, owner of the Los Angeles Times and San Diego Union-Tribune – may be interested in the Register and Press-Enterprise.
“There’s always that chance,” Mirman says of being outbid. “It’s the court’s obligation to seek out the highest bid.”
Freedom’s second trip to bankruptcy court reflects a common tale of financial adversity within a newspaper industry that has struggled since well before the recession as advertisers turned to online marketing options while readership shifted from print products. The industry decline forced bankruptcy on Philadelphia Newspapers, Journal Register Co., Star-Tribune Holdings, Sun-Times Media Group and the Tribune Co., owner of the L.A. Times.
For three-quarters of a century, Freedom was a Hoiles family business. The company acquired its flagship newspaper – then the Santa Ana Register – in 1935. Freedom grew into a media conglomerate with 28 daily newspapers and eight TV stations by 2004, when it bought out certain family members as part of a $1 billion borrowing deal.
The public’s changing reading and advertising habits along with the Great Recession took a financial toll on the debt-laden company. In 2009, Freedom sought bankruptcy protection, ending family ownership. Hedge-fund investors emerged with control of the post-bankruptcy company and immediately began selling off assets, notably the TV stations and numerous newspapers.
In July 2012, Freedom – by then comprising the Register and a handful of small newspapers – was bought by Kushner and Spitz for $50 million in cash and assumption of liabilities.
The new owners quickly sold off the remaining out-of-area newspapers to fund a bold expansion plan in Southern California. When that gamble backfired, Freedom’s finances were in such dire straits that Mirman said a bankruptcy restructuring became a needed solution.
“The filings should preserve more than 1,000 jobs and ensure the operation of an Orange County institution,” said Freedom’s bankruptcy attorney, William Lobel.
The Freedom bankruptcy is a complex case involving two dozen legal entities with roughly $100 million in debts, Lobel said. Major creditors include business lender Silver Point, owed $22 million (including $3 million lent to support the business after the filing); former owner Angelo, Gordon & Co., owed $17 million; and pension regulator Pension Benefit Guaranty Corp., owed $15 million.
By JONATHAN LANSNER / STAFF WRITER / OC Register.com
Source: http://www.ocregister.com/articles/communications-690125-bankruptcy-struggling.html
