By: Jim Rosenberg
Windjammer Mezzanine and Equity Fund II L.P. on July 20 filed a limited objection to the proposed sale of bankrupt Brown Publishing Co. assets based on what it says was the debtors’ failure to file notice with the court identifying the successful bidder and appending a copy of that bidder’s asset-purchase agreement. Windjammer is a minority shareholder in Brown Publishing.
The U.S. Bankruptcy Court for the Southern District of New York entered the sales procedure order on the motion of the debtors. The auction was to take place July 19, with objections filed July 20.
Windjammer stated that no filing had appeared on the relevant Web-accessible databases and that the debtors refused to respond to inquiries concerning the successful bidder’s identity.
The objection describes a situation in which the debtors require that objection to the proposed asset sale be made before the identity of the buyer and terms of the purchase could be known by potential objectors.
“This does not comport with due process, fundamental fairness, or common sense,” Windjammer argues, adding that the debtors’ refusal to reply to requests for the information suggested “a deliberate effort to gain some perceived tactical advantage.”
Windjammer asked the court not to approve the sale until the sales procedure order’s notice requirements are met and interested parties have been afforded time to consider the information and file objection.
Should the court approve the sale, Windjammer asks that insiders of the debtors not be released from claims against them as individuals.
At auction were 15 dailies and 32 paid weeklies. It was unclear how many parties bid for the Cincinnati-based company.
Just before Friday’s bidding deadline, the judge overseeing the Chapter 11 case ruled that Brown’s biggest creditor could bid using debt it’s owed instead of cash – seeming to ensure at least one more bidder in besides the “stalking horse” offer by a company formed and owned by Brown Publishing CEO Roy Brown and two other company executives. _That company, Brown Media, made an opening bid of $15.9 million for the chain, which claimed a book value of $94.1 million when it filed for bankruptcy May 1.
At the same time, the decision to allow credit bidding by PNC Bank may have had the effect of discouraging other bidders – an argument made by the committee of unsecured creditors who unsuccessfully pushed to prohibit PNC and the so-called “Bank Group” of creditors from making a credit bid.