Freedom Communications Inc., owner of more than 30 daily newspapers including The Gazette, filed for Chapter 11 bankruptcy protection in U. S. Bankruptcy Court in Wilmington, Del., this morning.
According to Bloomberg News, the company said that it has assets of between $500 million and $1 billion, eclipsed by more than $1 billion in debt. The company’s revenues totaled $734 million during 2008.
Even the lower figure of $500 million might exaggerate the value of company assets. During the booming market for media properties five years ago, Freedom sold 45 percent of the company to Blackstone Group and Providence Equity Partners for about $464 million, valuing the company at slightly more than $1 billion.
Since then, the market for media properties has collapsed.
For example, the Minneapolis Star-Tribune, for which McClatchy Companies had paid $1.2 billion during 1998, was sold for $530 million eight years later. Last January, the newspaper declared bankruptcy, seeking relief from more than $430 million in debt.
On Sept. 14, the Bankruptcy Court is expected to approve a reorganization plan which gives creditors all the equity in the company and $100 million in new debt. Under the plan, the Star-Tribune is valued at less than $140 million – about 12 percent of its 1998 sales price.
The Star-Tribune’s new owners have named a board of directors. The ownership group consists of original creditors and investors such as Angelo Gordon, a private equity group in New York and Wayzata Investment Partners, who purchased the distressed newspaper’s debt at a deep discount.
According to an article in yesterday’s Star-Tribune, the new owners plan to retain the paper for the indefinite future, hoping for better times.
The Los Angeles Times reported today that lenders representing more than 50 percent of Freedom’s debt have agreed to a restructuring plan.
Under the plan, Freedom’s lenders would forgive a substantial portion of the company’s indebtedness.
Under the restructuring plan, the present equity holders, including the Hoiles family, Blackstone and Providence would own no more than 2 percent of the company when it emerges from bankruptcy reorganization, and would have warrants to buy another 10 percent of the shares, depending on Freedom’s performance.