Who declares bankruptcy midnight on a Sunday, after a reporter starts asking questions? The Orange County Register, of course!
Yesterday, multiple, trustworthy sources who requested anonymity told me the Register's parent company planned to file bankruptcy sometime this week, if not sooner. I sent out an email for comment to Reg publisher Rich Mirman and one of their attorneys, which weren't returned by press time.
Then at 1 a.m. last night, a source sent me a press release officially confirming the story, along with another thing I was hearing: that notorious landlord Mike Harrah–the man who bought the Register's offices and land last year, and has been trying to build a 37-story office tower in SanTana for over a decade–was going to put in a bid with Mirman to take over the Register.
OH MY GOD…
"As publisher, I am committed to the company's mission of delivering relevant and essential local information that serves our communities," Mirman said in the press release. "As an investor, I am dedicated to strengthening the financial health and well-being of the business."
"I believe very strongly in preserving the leading voice for news and information in Orange County and the Inland Empire," Harrah added. "By investing in Freedom, we are investing in the future of our community."
By "our community," of course, Harrah means "I finally have a tenant for my Freudian phallic fortress"–but that's a post for tomorrow.
Respected business columnist Jonathan Lansner has the Register side of the story, although the story ain't allowing comments. Rumblings of bankruptcy started ever since current publisher Mirman took over the paper a year ago for former owner-publisher Aaron Kushner, he of the messianic plans to save journalism that fell flat and ruined the lives of hundreds of employees. Mirman's furious cutbacks have not been enough to stave off creditors, many whom have filed legal actions in courts across the country–and one that won a $640,000-plus judgement in federal court against the Register just this past Thursday.
In the ruling (which Lansner conveniently left out of his piece), U.S. District Court Judge James V. Selna found in favor of Fisher Printing in its complaint against Orange County Register Communications for breach of contract. In May, Fisher sued the Register in federal court for allegedly failing to pay printing costs from September 2014 to February of this year. It also complained that the Register "continued to place orders for materials with Fisher on a cash on delivery basis while failing to pay the outstanding invoices."
The Register's response? While admitting to some of the allegations, a response by then-attorney Derrick Talerico maintained at the time that it was "researching whether it had a contract with Fisher, or whether an entity related to [the Register], and not [the Register] was obligated to Fisher."
Selna didn't find such double-speak funny, and ruled that the Register had to pay Fisher $642,220.92 in unpaid bills and interest. The sudden turn in fortune might have motivated Register bosses to start planning for Chapter 11 much sooner than they had wanted.
"The Reg execs were planning to declare bankruptcy in early 2016," a source told the Weekly yesterday. "But after that judgement, they now plan to declare bankruptcy imminently."
It's the second time in six years for the company. And tellingly, the last attorney retained by the Register in their Fisher case–and the one representing them now–is one William N. Lobel, a guy who has long claimed his $950/hour fee is the highest of any bankruptcy lawyer in Orange County. Back in 2010, a Register profile described him thusly: "Lobel is a bankruptcy attorney whose well-heeled clients are facing one of life's more difficult realities. They owe more than they can possibly repay and their creditors have run out of patience."
Better get your money's worth, Rich! More–much more–as this story develops…in the meanwhile, anyone got any more info? Email me below–anonymity guaranteed!
After the jump, Mirman's email to the troops–sent late last night, of course. Good morning, Register reporters!
Almost a year ago to the day, I made a commitment to you and the communities we serve that I would dedicate myself to improving the company's financial well-being. My goal was to reestablish the company back on a trajectory of growth.
Thanks to all of you, Freedom Communications is on pace to generate a profit in 2015. I am very proud of what we have been able to accomplish in such a short period of time.
Despite this momentum, however, the accumulated financial losses incurred in 2013 and 2014 under previous leadership have left its mark on the company. Even with our recent success, the business is struggling to cover its financial obligations and is overloaded with debt.
To secure the financial stability of the company immediately and for many years to come, I am initiating two important steps starting today. First, I am announcing my intention to lead a group of local investors to purchase the assets of Freedom Communications. Second, we have filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code to protect the company through this critical period.
The filing will have minimal impact on the day-to-day operations of the business. Freedom will continue to fund daily operations, including payroll and health benefits, as well as post-petition vendor and partner invoices.
Our two daily newspapers, weeklies, magazines and websites will maintain their high standards of quality. Our advertisers and subscribers will not be impacted at all.
Going forward, we have a responsibility to manage and operate the business in a manner that reflects current market conditions. We will continue to identify opportunities for sustained growth and improved operating efficiency. The need for innovation remains just as high today as it has been for the last several years.
During the next few weeks, I will lead an effort to purchase the assets of the company. Mike Harrah, a respected business leader and owner of our corporate office building in Santa Ana, is a primary investor in the business. I am appreciative of his support and grateful for his experience and dedication to our mission. As part of the bidding process, we are committed to assuming the full liability of our employee pension plan to ensure that all participants receive their full benefits.
The sale process will likely take approximately 60 to 90 days.
I am confident our bid will be successful, and the company will emerge with a solid financial foundation and well-positioned for future success. The goal is to strengthen our position as the leader in providing local news and information for Orange, Riverside and San Bernardino counties.
I'll be visiting our offices in the days ahead, talking with you and answering your questions.
As always, thank you for your tireless commitment to our success. I appreciate all you do – and so do our readers, advertisers, and the communities we serve.
And now, this:
What is Chapter 11?
Chapter 11 is a legal mechanism for court-supervised reorganization or restructuring of a company's obligations. Chapter 11 provides a way for companies to gain time to restructure their debt while continuing day-to-day operations.
Why did Freedom Communications file for Chapter 11?
The action we are taking today is part of our strategy to restructure our debt and re-align our balance sheet with the realities of our financial situation. The Chapter 11 process provides the most timely and orderly means to implement the agreement we negotiated with our lenders.
Is Freedom Communications going out of business?
No. The purpose of Chapter 11 is to protect and strengthen our business so that we can compete successfully. We expect to do just that. Throughout the restructuring and beyond, we will continue to create and deliver the local content and advertising our customers depend on.
What happens to Freedom moving forward?
To expedite the process, companies often purchase their assets in a section 363 sale. Rich Mirman, Freedom's CEO and publisher, and business leader Mike Harrah are initiating a bid to purchase the assets of the company. Their bid includes a cash component, assumption of liabilities and the retention of the employee pension program. Unlike a plan of reorganization that must be approved by creditors and interest holders, a section 363 sale is approved by the bankruptcy court.
How long will the sales process take?
We anticipate it could take 60-90 days for the court to confirm the plan.