Tuesday, March 2, 2010

Objections filed in MediaNews bankruptcy

When MediaNews Group, owner of the Mercury News and other Bay Area dailies, announced on Jan. 22 that it was filing a "prepackaged" Chapter 11 bankruptcy petition, it said in a news release:
    ... [the] prepackaged plan won approval from its lenders, which means that the plan can bypass any need for negotiation or debate in court, and instead can win approval with a minimum of delay.
Chief executive Dean Singleton went on to say, "We already have the support and approval of our lenders, so we expect our plan to proceed through this process swiftly and smoothly."

According to the Denver Business Journal and the Denver Daily News, three creditors have filed objections in U.S. District Bankrupty Court to Singleton's bankruptcy plan that would pay creditors 18 cents on the dollar but give his management group 20% of the new company that will emerge from the bankruptcy proceedings. More objections could come before Thursday's deadline.

According to the two Denver publications (which are following it closely because MediaNews is based there), the objections have been filed by:

• Greenco Inc., a subsidiary of the Tribune Co., which claims it is owed $8.4 million and intends to sue MediaNews for that amount of money. It still wants to be able to sue for the money after the bankruptcy.

• Bank of New York Mellon Trust Co., which says it is currently in negotiations with MediaNews in an attempt to be repaid for money it loaned. The amount due wasn't given. It was apparently filing an objection to protect its rights to the money.

• Warner Gateway Properties, landlord of the Los Angeles Daily News, which said it doesn’t want the newspaper company to assume its own lease without proof it can pay.

According to the Business Journal:
    The Los Angeles Daily News occupies about one-quarter of the Warner Gateway project in Woodland Hills. MediaNews Group holds a 15-year, $27.6 million lease that expires in 2022, according to the filing. 
    The filing says representatives of the debtor began discussing a possible lease modification in January, but never made an offer, and provided information showing that the Daily News had lost $5 million over the past two years. 
    In February, the landlord received a document indicating that MediaNews planned to ask the bankruptcy judge to take its name off the master lease and assign responsibility to Los Angeles Daily News Publishing Co. (LADN). 
    Warner Gateway says it never agreed to this. 
    “The only evidence of the assignee’s financial health is two years of consistent multi-million-dollar losses, totaling in excess of $5 million,” Warner Gateway said in its objection. “The debtor has refused to provide any other financial information about LADN, its assignee.” 
    Only $2.1 million has been paid so far on the $27.6 million lease, Warner Gateway officials said. No security deposit was made. Before the Daily News moved in, the landlord invested about $3.9 million for improvements designed specifically for the newspaper, according to the filing. 
    Warner Gateway is asking the judge to do one of three things: either force Affiliated Media to provide financial statements proving that LADN is capable of paying the lease; require Affiliated Media to accept its responsibility for the lease; or require Affiliated to provide a stand-by letter of credit for at least one year’s rent.
The Denver Daily News says that if Singleton's bankruptcy plan is rejected by the court, his No. 2, Jody Lodovic, would feel the pain. Documents filed previously in the bankruptcy case indicate that Lodovic will get a $500,000 bonus if the bankruptcy petition is approved. Documents also show that Lodovic could get as much as $2.25 million this year while chief executive Singleton is in line to get $1.49 million.

4 comments:

Anonymous said...

MediaNews has said that all of its newspapers are profitable. The information Wolfe has obtained dispute that claim. Wonder how many other MediaNews papers are that bad off?

Anonymous said...

Give Singleton a break. This is a RESCUE plan. These papers aren't going dark. They're just restructuring their debt so that they can survive, and even thrive, in the years ahead. If you want local journalism, you should be rooting for Singleton, not knocking down his plan!

Anonymous said...

why is this case in delaware?

Anonymous said...

i almost want to cry upon hearing that jody lodovic's bonus is at risk ... not really.