Tuesday, July 7, 2009

Reorganization plan cleared for the Journal Register

Reorg plan cleared for publisher Journal Register

NEW YORK (AP) — A federal bankruptcy judge in New York has cleared the way for newspaper publisher Journal Register Co. to emerge from Chapter 11 protection.

The plan had won the backing of the vast majority of creditors, despite objections from some quarters, including state officials in Pennsylvania and Connecticut.

The company has drawn criticism for its plans to pay executive bonuses following its emergence from bankruptcy. Some creditors also questioned a provision that would arrange a $6.6 million payment from secured lenders to key suppliers, including ink and newsprint providers.

Judge Allan Gropper said in a ruling Tuesday that despite those objections, Journal Register's reorganization plan is consistent with federal bankruptcy law.

Journal Register publishes the New Haven (Conn.) Register and dozens of other newspapers. Like almost all publishers, it has been pummeled by declining advertising revenue as the traditional newspaper business model comes under assault from the Internet.

The company filed for bankruptcy in February, the third in a wave of Chapter 11 filings in the industry that has also claimed The Tribune Co., The Minneapolis Star-Tribune, The Chicago Sun-Times and the owner of both of Philadelphia's daily newspapers, among others.

The company's bankruptcy plan was essentially "prepackaged," having been negotiated with major lenders led by JPMorgan prior to its filing. The plan cancels Journal Register's stock and cuts obligations to secured lenders to $225 million from $696 million in return for ownership of the company.

The only significant addition that came during hearings is a $2 million fund set aside for unsecured lenders, who will receive about 9 cents on the dollar.

Unsecured lenders that qualify as critical suppliers, such as ink and newsprint providers, will be made whole with a $6.6 million gift from secured debt holders.

The latter provision drew criticism from Central States, a multi-employer pension fund, which called the plan inequitable. But the company contended any disruption in basic supplies could cripple an already fragile business.

Plans to pay out $1.3 million in bonuses to top executives also led to objections. State officials from Connecticut and Pennsylvania as well as the Newspaper Guild, one of the company's largest unions, asked the court to block the payments.

But in his opinion Tuesday, Judge Gropper said the planned bonuses do not violate bankruptcy code. He noted that debtors had been given the chance to review the bonuses and voted overwhelmingly to approve the bankruptcy plan anyway.

Connecticut Attorney General Richard Blumenthal offered a blistering response and said his office is reviewing the judgement to "determine whether further action is appropriate."

"This decision means that bankruptcy is no bar against bloated big-time bonuses," Blumenthal said in a statement. "The unfortunate bankruptcy court ruling means that (Journal Register) executives will be substantially rewarded more than $1.3 million in blatantly undeserved bonuses for shutting down newspapers and laying off employees."

Last year, deteriorating ad revenue led the company to shutter several weekly newspapers in Connecticut, including the Pictorial Gazette, the Branford Review, Clinton Recorder, Main Street News and the East Haven Advertiser.

Lawyers for the company did not return calls seeking comment on the case Tuesday. It was not immediately clear how quickly Journal Register can emerge from bankruptcy now that its reorganization has been approved.

Copyright © 2009 The Associated Press. All rights reserved

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