New York, August 31: Battered by the economic crisis, Freedom Communications Inc., which owns Orange County Register, is likely to file for Chapter 11 bankruptcy, according to The Wall Street Journal that cited unnamed people familiar with the situation.
Over the past year, several big publishers including the Tribune Company have filed for bankruptcy protection. The filing by Freedom will be yet another case of media suffering due to economic slowdown.
According to the Newspaper Association of America, there has been a decline in the print ads by more than 30 percent in the second quarter, the worst drop ever.
Freedom’s declining revenues
Freedom, which owns 32 dailies and 77 weekly newspapers and eight television stations, has been struggling to cope up with declining advertising revenue and heavy debts.
Over the past five years, the company’s earnings before interest, taxes, depreciation and amortization have declined about 75 percent to about $50 million.
"Freedom has been affected by the same thing that all the media companies have been affected by: the decline of advertising, which has been accelerated by the downturn in the economy," said, Robert Emmers, a spokesman for Freedom. "Freedom has been working really hard to realign its balance sheet with the reality of the media market today."
As a cost- cutting measure, Freedom had announced last month that it would cut pay by 5 percent across the board. Further, Register had announced measures like layoffs, salary cuts and unpaid furloughs.
Shift in ownership
The bankruptcy protection, which could be filed as soon as Tuesday, is expected to shift the control of the company to Freedom’s lenders. The lenders, which include J.P. Morgan Chase & Co., SunTrust Banks and Union Bank of California, hold up to $770 million in debt.
The company has already reached an agreement with its senior secured lenders over the terms of restructuring the company to reduce its debts.
Freedom was founded by R.C. Hoiles in 1930s and even today majority of stake is still owned by Hoiles family. Private equity firms Blackstone Group and Providence Equity Partners have 40 percent stake in the company as some of the family members had sold their stake in Freedom in 2004 as a part of recapitalization.
The bankruptcy filing will probably wipe out the stake held by private equity firms and remaining family members.