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As Freedom Communications wends its way slowly through bankruptcy, the vultures are circling.
It’s not clear whether the company will survive or whether its component pieces-including the Gazette- will be sold to local investors.
The company never made much sense to begin with.
It was a random accumulation of media properties ranging from a big metro daily (the Orange County Register) to community papers in the Rio Grande Valley to TV stations in the east and midwest to medium-market metro dailies such as the Gazette and the now-doomed East Valley Tribune, once the pride of Mesa, Arizona.
Its creation was made possible by a long-prevalent delusion among media titans, bankers, CEOs, stock analysts and millions of folks who should have known better.
Forget the Internet thing! Don’t worry about the fluctuations of the economy! Media properties can only increase in value! Buy ‘em now, take the cash flow, borrow more money, and buy more media properties!
So Freedom borrowed a billion or so and headed for bankruptcy court when the party ended.
The company cut a deal with its secured creditors, led by J.P. Morgan Chase, that would have handed 98 percent of the equity to the banks in exchange for reducing the company’s secured debt from approximately $770 billion to $330 million.
Unsecured creditors, who are owed more than $300 million, have opposed the deal, calling it “wicked and immoral.”
It calls for unsecured creditors to receive only $5 million in compensation, provided that they approve the deal. If they vote against it, they get nothing.
The likely result? Months, maybe years of lawsuits and the eventual dissolution of the company.
When dissident Freedom Shareholders, led by Springs resident Tim Hoiles, forced a partial buyout of the company six years ago, the company was valued at more than $2 billion.
Today, it’s likely worth less than 10 percent of that grossly inflated estimate. In fact, so inflated was that estimate that unsecured creditors may sue the secured creditors, alleging that they knew, or should have known, that the company would be made insolvent by assuming so much debt. That may seem far-fetched, but a very similar lawsuit was recently decided in favor of the unsecured creditors, who, in a nice reversal, received all of the equity in the bankrupt company as well as a $300 million payoff from the secured lenders-who received nothing.
So what will happen to the Gazette?
Sources within the business community, whom I, in my naivete, deem reliable, have told me that they’ve been approached recently by Independent publisher John Weiss, who’s trying to put together an investment group to buy our floundering daily. I called the Indy’s colorful publisher, who would neither confirm nor deny the reports.
“I can’t talk now,” he said “I’m in a meeting [who among us has used that excuse?]. And I’m leaving for Argentina tomorrow morning, so I’ll talk to you when I get back on December 1st [now there’s an excuse I’ve never heard!].”
And, as we’ve reported in the past, Gazette publisher Steve Pope has also expressed interest in buying the paper.
Meanwhile, even though state and municipal elections are 12 and 18 months away, it’s never too early to speculate.
Now that Josh Penry has “withdrawn” from the race, chased off by the big dogs of the GOP, Scott McIniss is a lock to capture the Republican nomination for governor.
McIniss is a moderate Republican of demonstrated competence. He can win, if he can both pad Republican margins in El Paso County and reduce Democratic margins in Denver/Boulder.
That’s why he’ll name County Commissioner Sallie Clark as his running mate.
Clark’s presence on the ticket will energize local Gopsters, who have long felt under-represented at the highest levels of state government. She’s demonstrably competent, thoughtful, well informed-and female. Unlike state representative Amy Stephens, who might also be under consideration, she’s hard to demonize. She hasn’t had to pander to red-meat social conservatives to get elected, so the lib’ruls can’t paint her as the second coming of Marilyn Musgrave.
So who will become our next Mayor? I doubt whether we’ll elect someone without experience in elected office. Right now, it’d be difficult for any of our incumbent councilmembers to run successfully for dog catcher, but 18 months is an eternity in politics. By next November, we’ll have forgotten all about 2C, the Dougster, and the USOC deal-and the city election won’t take place until April.
We can expect a crowded field of mayoral wannabes. Remember, it’s a non-partisan race, and all you have to do to get on the ballot is to collect a few hundred signatures from registered voters. And just as Lionel Rivera prevailed over three of his colleagues on city council to win during 2003, we can expect that the winner during 2003 will eke out victory with a narrow plurality over the competition. And the winner is (drum roll)…the blunt, cantankerous Vice Mayor hisself, the honorable Larry Small!