The owner of the Orange County Register in California and dozens of other newspapers became the latest publisher Tuesday to seek bankruptcy protection, driven into financial despair by a staggering drop in advertising revenue.
The filing was part of a prepackaged plan approved by a majority of Freedom’s lenders. The consensus on the proposed restructuring should minimize that haggling that can bog down bankruptcy proceedings.
“Reaching this agreement with our lenders provides us with an orderly process to realign our balance sheet with the realities of today’s media environment,” said Burl Osborne, a newspaper industry veteran who became Freedom’s chief executive two months ago.
Osborne said Freedom still has ample cash to finance its operations and pay its bills. The company sought to assure customers that the bankruptcy filing wouldn’t affect the day-to-day business.
In a Chapter 11 petition made Tuesday in Wilmington, Del., Freedom Communications Inc. listed debts of more than $1 billion and assets of $500 million to $1 billion. Freedom’s debt includes $770 million owed to a group of banks led by JPMorgan Chase & Co.
Freedom has been struggling to bring in enough money to repay its debt for the past year. It already has required workers to take unpaid leave and imposed an across-the-board 5 percent cut in wages.
The Irvine, Calif.-based company employs 8,200 people in 15 states.
In an attempt to avoid a bankruptcy filing, Freedom negotiated a reprieve from the restrictions governing its loans four months ago. But it still couldn’t find relief from a recession that continued to dry the ad sales that generates most of its revenue.
It’s a story that has become all too familiar for newspapers as the worst economic downturn since World War II exacerbates the trouble that the industry already was facing as both readers and advertisers increasingly shun print editions for online alternatives.
Freedom is at least the 10th newspaper publisher to file for bankruptcy protection over the past year. The other publishers still in bankruptcy proceedings include the owners of the Los Angeles Times, Chicago Tribune, the Star Tribune of Minneapolis and The Philadelphia Inquirer.
Other newspapers, including the Rocky Mountain News in Denver and The Seattle Post-Intelligencer, have closed their print editions without even trying to work things out in bankruptcy court. The P-I continues as a Web-only publication.
The financial upheaval seems likely to leave more newspapers in control of lenders, who typically get large stakes in the troubled companies that use bankruptcy protection to escape their debts.
Privately held Freedom has been under family control since one-time printer’s apprentice R.C. Hoiles moved from Ohio to Orange County, where he bought what was then known as The Santa Ana Register in 1935. The newspaper, then located in a largely undeveloped suburbs, would become the bully pulpit for Hoiles’ libertarian views and religious principles, as well as the foundation of tremendous wealth that has been passed along to his heirs.
As Orange County turned into a large metropolitan area with Disneyland attracting millions of visitors each year, the Hoiles newspaper emerged as one of the biggest dailies in the country.
The Register’s success led to an expansion of the company’s holdings to include 30 daily newspapers and dozens of weeklies as well as eight television stations in New York, Texas, Florida and three other states. Besides the Orange County Register, Freedom’s other newspapers include The Gazette in Colorado Springs, Colo., and the Odessa American in Texas.
As a flank of Freedom’s family of owners became increasingly nervous about the newspaper industry’s uncertain outlook, the company agreed in 2004 to a deal that sold 45 percent of the company to private equity firms Blackstone Group LP and Providence Equity Partners for about $450 million.
Freedom Communications’ newspaper revenue and circulation began to crumble not long after that stake was sold, forcing the company to scramble to make ends meet while it poured more resources into its online operations.
The Register’s weekday circulation averaged just under 231,000 in the six-month period ending March 31, a 23 percent drop from four years ago when the number stood at 300,694, according to the Audit Bureau of Circulations.
Among other things, Freedom Communications brought in a new chief executive, Scott Flanders, in 2006 and ushered in a new chief financial officer three months ago.
Flanders, though, left Freedom Communications in July to become CEO of another troubled publisher, Playboy Enterprises Inc. Osborne was put in charge on an interim basis. Osborne was publisher of the Dallas Morning News for more than 20 years and served as chairman of The Associated Press from 2002 to 2007.