The Star Tribune reports today that the newspaper’s plan for reorganizing under Chapter 11 bankruptcy was approved Wednesday by a U.S. bankruptcy court judge in New York.
No real surprise there since the newspaper has meticulously executed each step toward satisfying the court and its creditors that it could be a viable business if given a chance to cut labor costs and shed most of its $500 million in debt. The new debt load would be $100 million under the exit plan.
The real suspense comes in the next steps which will determine the voice, community presence and journalistic strength of Minnesota’s largest newspaper.
Who will run the paper?
The new publisher and board of directors will be disclosed by Aug. 24 under the exit plan. The Strib article offers no clear hints, except to say that about 10 investors will take over 95.5 percent of the company and select the new management and director team.
Wayzata Investment Partners, which specializes in turning around troubled companies, was identified as the largest of five major secured lenders when the newspaper filed for bankruptcy in January. It held $58 million of the debt.
The other first-tier lenders at the time were Credit Suisse ($46.7 million) Angelo Gordon & Co., LP ($44.9 million) Davidson Kempner Partners ($43.9 million) and General Electric Investment Corp. ($38.6 million).
Angelo Gordon holds sizeable interests in the bankruptcies of two other prominent newspaper companies: Philadelphia Newspapers and Tribune Co., which owns papers nationwide.
Rick Edmonds noted in his Biz Blog on Poynter Online that Angelo Gordon could end up with an ownership role in metros in Los Angeles, Chicago, Philadelphia, Baltimore, Orlando and Fort Lauderdale as well as in Minneapolis. Further, the New York-based company is part of a creditors group that recently took over American Media Inc., publisher of The National Enquirer and The Star.
But the Strib article says today that the newspaper’s “debt is still trading in the financial markets, so it will not be known exactly how many investors there are — or their identities — until their votes are tallied.”
Major staff changes?
The company fought hard with its unions to set the terms for sizable staff reductions. We’ve seen some reductions and newsroom changes that make a difference in the daily paper — most notably, the shuffling of columnists. But the company has yet to show the full force of its new power in this regard.
Today’s Strib report says that the last of the newspaper’s 10 unions has accepted contractual concessions. The International Association of Machinists and Aerospace Workers, which represents 16 workers who maintain equipment at the newspaper’s printing plant, has ratified a new contract, it said. The newspaper had asked the bankruptcy judge to abrogate the old contract.
So now the curtain closes on the newspaper’s renegotiation phase with its workers. And the stage is set for the new management to shape the staff as it sees fit.
More bureaucratically, the official next steps are for the company to solicit votes from its creditors and for them to weigh in by Sept. 3 with a goal of bringing the newspaper out of bankruptcy by Sept. 17.
The newspaper also has more work to do on the exit plan, according to Finance and Commerce.
While approving the Star Tribune’s proposal, U.S. Bankruptcy Judge Robert Drain in New York “said the plan must make clear that its confirmation isn’t contingent on an exit loan — that ‘the company thinks it has enough cash,'” Finance and Commerce reported.
Drain also requested clarification of proposed legal releases. The plan calls for protection from lawsuits related to the bankruptcy and other transactions by the debtors against present officers and directors, members of the creditors’ committee, financial advisers, attorneys, actuaries, employees, investment bankers and the private equity owners who bought the newspaper in 2007 — Avista Capital Partners and the Harte Family Trust.
The U.S. Bankruptcy Trustee objected last week to such broad protection. The newspaper’s attorneys filed a document on Monday saying both sides have agreed to deal with the objection before the reorganization plan is confirmed, presumably on Sept. 17.
Sharon Schmickle can be reached at sschmickle [at] minnpost [dot] com.