The WSJ said that the chain would be taken over by the banks that hold the company’s debt and that present equity holders would be wiped out.
Until 2002, Freedom was owned by descendants of Raymond Hoiles, who had founded the company more than seven decades earlier.
Disagreements between family members came to a head during 2002, when the company agreed to a partial buyout, enabling the dissidents, led by Colorado Springs resident Tim Hoiles, to sell their stock.
As a consequence of the buyout, two private equity firms, Providence Equity Partners and the Blackstone Group, acquired about 45 percent of the company, leaving the Hoiles family in control.
But like many newspaper publishers, Freedom has been squeezed by declining advertising revenue and outsized debt loads. Since Freedom is a private company, details about the company’s finances are not publicly available, but the WSJ reported that Freedom’s current debt is about $774 million.
A bankruptcy filing is anticipated as soon as today.
The fate of the Gazette, and of the company’s 30 other newspapers is as yet unknown.
The company’s individual properties are thought to be profitable as stand-alone entities, but much of their revenue has been diverted to servicing corporate debt.
The company announced last month that it would reduce pay across the board by 5 percent, and the Gazette has sought to cut costs this year with layoffs and unpaid furloughs. Similar measures have been employed by newspapers nationwide, as publishers have attempted to maintain margins during the recession.
Print media have been especially hard-hit by the economic downturn. Classified advertising, which once accounted for as much as half of daily newspaper advertising revenue, has shrunk dramatically as advertisers have migrated to online sites such as Craigslist.
John Weiss, the founder and publisher of the Colorado Springs Independent, said that he had been contacted “sort of jokingly” by people who want to know whether he’s planning to buy The Gazette.
“I’m not,” he said. “But my hunch is that everything in the Freedom chain is in play – and it would be nice if a local investment group took it over.”
Sean Paige, former editorial page editor of The Gazette, expressed concern that a new ownership group, if one emerges, might abandon the newspaper’s longstanding commitment to libertarianism.
Paige said that “he’s aware of rumors” that Gazette Publisher Steve Pope might be talking to potential investors about buying the paper.
“I don’t know what his political philosophy is, but I think it would be a bad business decision to tamper with a voice which is a very good fit for the community,” Paige said. “I think it would cost them. To think that you’ll increase revenues by turning The Gazette into the Denver Post, that’s just delusional.”
But, Paige said, the ultimate outcome of Freedom’s bankruptcy is uncertain.
“They’ll probably have to sell some properties,” he said. “And I’d applaud anyone who’d be willing to buy a newspaper in this climate, but I haven’t seen a ‘for sale’ sign on the building yet.”
Weiss said that Hoiles is the big winner.
“He sold at the right time,” Weiss said. “But my big concern is that there are a lot of long-term employees there who have done great work. They don’t benefit on the upside and they get screwed on the downside.”