New owner of NY Daily News mulling bankruptcy: source
The new owner of the New York Daily News is considering a possible Chapter 11 bankruptcy filing for the New York tabloid, a source told Media Ink.
“It’s under review,” said a source familiar with the situation. “It’s definitely on the table and maybe the front of the table, not a side table.”
A spokesperson for the newspaper’s new hedge fund owner, Alden Global Capital, dismissed it as an unfounded rumor.
“This is entirely false and your source clearly knows this by fabricating lies on condition of anonymity,” the spokesperson said.
In Chapter 11, a business continues to operate while seeking to reduce its debts.
Alden bought the Daily News along with nine other dailies owned by Tribune Publishing in May, but turned the New York tabloid into a separate entity, raising concerns about the newspaper’s future.
John Heffernan, president of the New York Pressman’s Union which also runs the Allied Printing Trades Council for Drivers, Electricians and Shippers, said “all unions are wary” of the spin-off.
“We are reviewing the SEC records and are concerned that they are trying to break out of their retirement commitments,” Heffernan said.
In this context, negotiations on new union contracts heated up during a meeting on Wednesday between union officials and representatives of the Daily News.
Sources speculate that bankruptcy could help Alden escape the newspaper’s hefty pension obligations, estimated at between $ 20 million and nearly $ 100 million.
The retirement commitments are owed in large part to the blue-collar press that prints the New York tabloid and the drivers who have delivered the paper over the years.
At its peak, the Daily News had a circulation of over 2 million on weekdays and 5 million on Sundays. Today, its paid print circulation has fallen to just 63,000 copies per day.
Still, retirement experts say Heath Freeman, chairman of Alden Global Capital, may find it difficult to opt out of the newspaper’s retirement commitments from its Tribune Publishing unit, which owns the Chicago Tribune, the Baltimore Sun, the Orlando Sentinel and the Hartford Courant are still making a good profit.
Harvey Katz, a pension lawyer at law firm Fox Rothschild LLP, told Media Ink that if a profitable company were to set up one of its struggling units as a separate company, the parent company could still keep the bag in case of bankruptcy.
“Moving it to an entity that only has losses will be overturned by the courts,” Katz said.
If the Daily News were to go bankrupt, the Pension Benefit Guaranty Corp., a federal agency responsible for deceased pensions, could end up paying only 20 cents on the dollar.
The Daily News was the only holding of Tribune Publishing to be created as a separate entity. It was renamed Daily News Enterprises. The change came immediately after Alden struck his $ 633 million deal in late May to privatize Tribune.
Alden already owned 32% of Tribune’s shares, so only had to fork out around $ 430 million for shares he didn’t already own. In the process, he loaded the once-debt-free Tribune with nearly $ 300 million in new debt, mostly from private equity investor Cerberus. The new debt also includes a $ 60 million loan with an exorbitant 13% interest rate from another news company controlled by Alden, Media News Group.
More recently, a recent ProPublica article reported that Randall Smith, chairman of Alden and Freeman’s mentor, had $ 252 million in his Roth IRA.
Tribune employees, by contrast, recently suffered a series of voluntary buyouts for unionized journalists and non-union managers. And staff members have complained that Alden has not made any contributions to the 401 (k) pension plan since the deal was struck in late May.
Tribune said in a note to staff members on Thursday that it would finally start contributing again, but not until August 1. The company was unsure if there would be a “catch-up” contribution for the two months it has skipped since the deal was struck.