By: E&P Staff
A federal bankruptcy court judge approved a new deal in the Freedom Communications bankruptcy that sets aside far more money for unsecured creditors than a previous plan, and leaves nothing for the members of the Orange County Register’s founding Hoiles family members.
Under the plan, Freedom’s secured debt would be reduced from $770 million to $325 million, according to an account of the judgment in Wilmington, Del., by Register Washington Bureau Chief Dena Bunis.
Freedom could emerge from bankruptcy as soon as March 9 if the plan is approved by creditors.
As before, Freedom’s lenders will gain possession of the chain, which publishes 32 dailies and owns eight television stations.
The plan greatly increases the amounts set aside for unsecured creditors from the original plan submitted to the court, which offered all unsecured creditors a total of $5 million.
Under the new plan, unsecured creditors will split up about $32.2 million.
And money has been set aside for Register newspaper carriers, who successfully sued Freedom for $29.5 million in a lawsuit about their employment status. Under the plan, $14.5 million will be put into a litigation trust to settle unsecured claims, including, it would appear, the newspaper carriers.
The bankruptcy plan dramatically changes the arrangement for the founding Hoiles family members and the private equity groups they recruited to keep control of Freedom several years ago.
Under the original bankruptcy plan, they would have retained a 2% share of the company after bankruptcy, with warrants to purchase up to a 10% stake.
“Now they will get nothing,” Bunis wrote in the Register account.
McEachen said management will still be able to get a 10 percent share in the new company.