Thursday, March 4, 2010

Judge approves MediaNews bankruptcy plan

Lodovic and Singleton
The AP is reporting that a federal bankruptcy judge in Delaware today approved the bankruptcy plan of the parent company of the Mercury News, Contra Costa Times, Oakland Tribune, San Mateo County Times and other MediaNews Group papers.
    The confirmation of the reorganization plan in Delaware puts Affiliated Media, the holding company for MediaNews Group Inc., on track to emerge from bankruptcy protection by April 1 and possibly as early as March 18, company spokesman Seth Faison said.
    The company filed for Chapter 11 protection on Jan. 22. ... The quick approval produced a big payday for Affiliated's president, Joseph Lodovic IV
    He qualified for a $250,000 bonus by getting the plan confirmed before April. That comes on top of a $250,000 award he already got for putting together a plan that was approved by Affiliated's lenders before the bankruptcy filing. 
    Under the plan, privately held Affiliated will dump most of its $930 million debt in exchange for relinquishing ownership to dozens of lenders. 
    The lenders, which had been led by Bank of America, will hold 89 percent of Affiliated's common stock, with the remaining stake going to Lodovic and the company's CEO, William Dean Singleton
    Singleton, who is also chairman of The Associated Press, will retain control of the company's board. Heading into the bankruptcy filing, Singleton held a roughly 30 percent stake in Affiliated.
    Richard Scudder, who co-founded MediaNews with Singleton in 1985, surrendered his holdings as part of the reorganization. Another publisher, Hearst Corp., will give up half of the 30 percent stake that it acquired in Affiliated's newspapers outside the Bay Area as part of a complex $317 million deal in 2006.[More]
The Fitz & Jen column on the E&P site notes:
    Under the plan in the prepackaged bankruptcy, secured lenders holding about $950 million in debt will exchange it for about 89% of equity in the post-bankruptcy company. 
    In court filings, the company said lenders will recover from 29% to 36% of their claims. Subordinated noteholders, no surprise, didn’t make out nearly as well. Their $326 million in claims gets than an 8.25% equity stake, a recovery of about 2%. 
    Dean Singleton ... stays in control of MediaNews as well. Singleton has already picked his four people on the seven-seat board of directors: Singleton himself; his President Jody Lodovic; Affiliated’s general counsel, Howell Begle; and the founder of a chemical business, John Huntsman. The court’s okay turned Thursday into payday for Lodovic, who gets a $500,000 bonus because the plan was approved before the end of March.
Before today's approval, the company filed a declaration by CFO Ronald Mayo in which he said that "Any delay in emergence from Chapter 11 will damage the debtor's business, to the detriment of all parties of interest," according to a report in the Denver Business Journal.

And here's a blast from the past — A MediaNews press release nine months ago in which it flatly denied a report was going to file for bankruptcy.

    A media report on Wednesday, citing rumors from unnamed sources, reports that MediaNews Group has proposed a refinancing plan to its bank lenders that would cause a change in control of the company and possibly involve a bankruptcy filing. 
    The story is inaccurate in almost all respects. As previously reported, MNG is in discussions with its bank lenders to restructure its balance sheet, including an exchange of some of its bank debt for equity in the company. 
    Proposals to the company's lenders do not include a change in control of the company, nor do they include proposals for any bankruptcy filings, as the rumors suggest. MediaNews Group remains in compliance with its bank agreements while refinancing discussions continue.


Anonymous said...

When the dust settles, Singleton will want to start acquiring newspapers again, as he has done for years. But given how poorly creditors were treated in this bankruptcy, you've got to wonder if there will be anybody out there stupid enough to lend him money. He's probably a believer in the P.T. Barnum line, "There's a sucker born every minute."

Anonymous said...

A lot of people in the news media are saying: "MediaNews Group has emerged from bankruptcy and has eliminated 85 percent of its debt -- DAMN IT !!!! "

Anonymous said...

Technically, MNG hasn't "emerged from bankruptcy." The judge's ruling last week allowed the company to "enter" bankruptcy proceedings. It's the beginning of a process. When they emerge is anybody's guess, but since they got approval from creditors early on, it's probably going to be within a few weeks, maybe a month or two at the most.

The fact that they were able to reduce their debt is good because they won't have to spend as much money on debt service and can devote more of their resources to operating their newspapers. Or at least one would hope that's what they do with the money they've free up.

Anonymous said...

A lingering question I have is whether Singleton will be able to acquire more papers in the future. If an individual had a bankruptcy on their credit report, it's unlikely they would qualify for any loans. But things are probably different for a wheeler-dealer like Singleton.

Anonymous said...

Singleton will be able to finance new deals. His bankruptcy simply means he will have to pay his lenders more interest than a borrower with a good track record.