By: Mark Fitzgerald
The company founded by Brown Publishing Co. CEO Roy Brown and two other top executives of the bankrupt newspaper publisher cannot close the auction sale because its financers have pulled out of the deal, Brown Publishing said in a court filing.
The development is the latest twist in a most unusual newspaper bankruptcy case. Brown Media — the entity wholly owned by Roy Brown, Brown Publishing, CFO, Joseph Ellingham and its general counsel, Joel Dempsey – last month were declared the winners of the bankruptcy auction with a bid of $22.4 million for all but one of its 15 dailies, 29 of its 32 paid weeklies and 11 business journals. When Brown Publishing filed for bankruptcy May 1, it declared liabilities of $104.6 million and said its properties had a book value of $94.1 million.
Brown Publishing said PNC Bank, which led the group of its senior creditors, should be declared the winner of the auction now because it was second-highest bidder. PNC expects to close the sale no later than Sept. 3, Brown Publishing said in the filing, in which asked the bankruptcy court to let it use cash collateral to continue operating through that date.
Unless permission is given to use cash collateral, Brown Publishing said, it “will be forced to shut down their operations and liquidate all assets, resulting in a disastrous loss of value for their respective estates as well as a corresponding decrease in the value of the first lien lenders’ collateral.
The filing did not say how much PNC bid for the company. Brown Publishing did say that “the projected liquidation values of the Debtors’ assets are significantly lower than the value to be gained from the proposed sale of the debtors’ assets to PNC.”
In the weeks leading up to the July 19 auction — itself a long procedure which ended as the next morning was dawning – the committee of unsecured creditors complained in court papers that the sale process had been rigged to favor the Brown insiders. Brown Media made an initial “stalking horse” bid of $15.9 million for the Cincinnati-based company.
At the auction, the parent company of the Delphos (Ohio) Daily Herald was declared the winning bidder for three Ohio newspapers and their related assets: one daily, The Times Bulletin in Van Wert and two weeklies, the Putnam County Sentinel and the Ada Herald. Delphos Herald Inc. bid $3.59 million for the papers.