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FREEDOM MAY GO CHAPTER 11; PHILLY PLAN GETS FARTHER Orange County Register parent says it's 'working with our lenders'.

In the last days of the month, August continued its focus on newspaper business bankruptcies, as the Wall Street Journal reported yesterday that Freedom Communications Inc. of Irvine, Calif. -- publisher of the Orange County Register and 32 other dailies, as well as eight TV stations -- may well file for Chapter 11 reorganization this week. Also in newspaper bankruptcy news, management and lenders at the Philadelphia Newspapers agreed on a few points, but disagreed on others as the judge in the case weighed management's reorganization plan, Tribune's bond holders contended the privatization of the company in 2007 wasn't on the up-and-up and the judge in the Tribune case said the company's sale of its Chicago Cubs baseball franchise was a fine idea.

Oh, and the new owners -- the former lenders -- of the Star Tribune of Minneapolis announced four proposed members of its board of directors, including two publishing heavy-weights.

While the Journal quoted "people familiar with the situation," saying that a Chapter 11 filing is imminent for the Southern California multimedia company, the Register itself was less assured in its reporting, saying only that Freedom was talking with lenders regarding its situation.

"We're working with our lenders," Burl Osborne, Freedom's interim chief executive, told the Register. Osborne, the former publisher of the Dallas Morning News and executive with both The Associated Press and Belo Corp., has been a Freedom board member since 2004 and took over as interim chief executive in July when Scott Flanders left to run Playboy Enterprises Inc.

Freedom's problem stems from both the advertising recession as well as a 2004 deal that bought out dissident cousins in the privately held Freedom. The Hoiles clan had been roiled for more than two decades over a desire by some family members to cash out their holdings, versus those cousins who wished to continue to control the company. In 2004 a $476 million deal was struck to bring in the private equity companies Blackstone Group and Providence Equity Partners as minority partners, letting the dissident family members to take the money and run and allowing the remaining cousins to continue to own and operate the business. While the equity firms undoubtedly put money into the deal, most was financed through J.P. Morgan Chase & Co., SunTrust Banks and Union Bank of California.

The Journal suggested yesterday that under a pre-arranged Chapter 11 filing the lenders who financed that deal -- the paper said they hold about $770 million in debt -- would end up owning and controlling the company, the remaining cousins would have a minority stake in the business and the equity firms would be out in the cold, no longer with an interest.

On the other coast, in Philadelphia, wrangling continued between the existing management of the Inquirer and the Daily News and the company's senior lenders. While the two sides struck some deals in the U.S. Bankruptcy Court on Friday, divisions remain.

The agreements included a $15 million debtor-in-posssesion financing from Citizens Bank, which will give the company some elbow room while the reorganization continues. The two sides also agreed to allow management until Nov. 2 to exclusively pursue the reorganization, with the proviso that management won't ask for another extension and that should its plan to place the company up for auction fall through, the deadline would be cancelled.

Where they disagreed was whether the senior lenders -- who include Angelo, Gordon & Co., CIT Group, Eaton Vance Management and Citizens -- can use their existing debt as part of their bid should they decide to participate in the auction.

To bolster their position, the senior lenders brought Robert Hall -- the longtime Knight Ridder top executive who was publisher at the papers for 13 years -- to bankruptcy court and told the judge he had been advising them for months and that he will be part of the management team should the lenders take over.

Also over the weekend, the soon-to-be owners of the Minneapolis paper said they were proposing four names for a six-member board of directors for the Star Tribune, which would include the former Wall Street Journal publisher Gordon Crovitz and the former long-time head of Community Newspaper Holdings Inc. of Alabama, Michael Reed, who for the last three years has run GateHouse Media Inc. of Fairport, N.Y.

Additionally, names proposed include Michael Sweeney, managing partner of Goldner Hawn Johnson & Morrision of Minneapolis and another Minneapolis resident, William Farley, who is with Livingston Capital.

Kevin Carey, the judge in the Tribune Co. bankruptcy, said today that the move to sell the Chicago Cubs would be expedited through his court. Earlier last month the Ricketts family said it would pay $845 million for the baseball franchise, Wrigley Field and Tribune's stake in a local sports TV network.

Carey called for any objections to the deal to be put forward by Sept. 17 and a hearing on the deal a week later. Tribune management noted that the Ricketts family could cancel the deal without any penalties -- in fact, Tribune could owe them money -- should any complications arise.

As part of the deal, the Cubs organization itself will go into bankruptcy for two or three days so that the transfer will be clear of any claims or liens.

In other Tribune news, company bond-holders have asked Carey for permission to look more into the 2007 deal that took Tribune from a private company into its current hybrid ownership, which includes a controlling stake by real estate mogul Sam Zell as well as an employee stock-ownership plan.

The Journal reported on Thursday that the bond-holders believe that senior lenders -- including J.P. Morgan Chase & Co. -- knew in advance the deal was shaky and would push Tribune into bankruptcy. The paper said that the bond-holders represent 18 percent of the company's bond debt which was issued between 1992 and 1997.

Should the judge not allow them to do their own investigation, the bond owners want the judge to appoint an independent examiner instead.

Same names are popping up in a number of these bankruptcies, including Morgan Chase and Angelo Gordon; the former apparently being unlucky, while the latter specifically acquiring debt in order to be part of the work-out. Angelo Gordon's Brad Pattelli was interviewed by the Star Tribune for today's paper and he said the company -- which has positions with not only the Star Tribune but also the Philadelphia papers and the Tribune Co. -- isn't planning to push to combine any of the operations. "We see each of these situations as independent," Pattelli said.
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Title Annotation:Freedom Communications Inc
Date:Aug 31, 2009
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