Recorder parent files Chapter 11 bankruptcy
Freedom Communications Inc. in Irvine, parent of The Porterville Recorder, reached agreement with the company’s lenders on the restructuring of its debt and will complete the process through a Chapter 11 bankruptcy reorganization filed in a Delaware court today, company officials announced.
“I consider this to be good news, not bad news,” said Burl Osborne, Freedom’s interim chief executive. “It’s not about liquidation or going out of business. It allows the company to operate more effectively.”
Under the reorganization, Freedom’s debt will be cut to $325 million from more than $770 million.
Existing shareholders, including members of the founding Hoiles family, and two private equity firms, the Blackstone Group and Providence Equity Partners, will retain a 2 percent equity interest in the company. They also will be granted warrants that will allow them to purchase up to 10 percent of the shares in the company.
However, the family, which has owned the flagship Orange County Register since 1935 and has since seen the company grow to 33 dailies, 70 weeklies and other publications, and eight television stations, will give up control to the banks. The lenders will select a new board and appoint a new CEO.
Freedom has owned The Recorder since 1974.
Osborne said he expects the bankruptcy process to take four to six months, although it may take a little longer to get Federal Communications Commission approval for the company’s television stations.
Meanwhile, readers, vendors and advertisers should see no interruption and no change in operations.
“This gives us a green light to operate the business as usual,” said Mark McEachen, Freedom’s chief financial officer.
Today’s filing signals the end of a struggle to keep the media company afloat as it battled a major economic downturn and a fundamental restructuring of the news business while burdened with $770 million in debt.
It is the final chapter of a family dispute dating back to the 1980s which resulted in a major rift among descendants of founder Raymond Cyrus “R.C.” Hoiles.
In 2002, Timothy Hoiles, grandson of the founder, led a group of dissident family members who wanted to cash out their shares, claiming the company had been poorly managed.
Blackstone and Providence agreed to put up $467 million to help with the buyout, which left the company with $1 billion in debt.
Although the company was able to pay down some of the debt it was unable to manage in the face of the recession, a major drop in real estate and employment advertising, declining circulation and new competition from the Internet.
As the company struggled with the debt, it received a waiver from its agreements with its lenders until Dec. 31. However, a major payment was due at the end of the first quarter of 2010, a payment Freedom officials say they would be unable to make under current financial circumstances.
“I want to reinforce and let everyone know this is a very good thing for Freedom and for the people in the company and the people served by the company,” Osborne said.
-- Contact The Recorder newsroom at 784-5000, Ext. 1040.
