Insiders
including executives and other shareholders of Western Communications have repeatedly
provided funds to assist the company’s flagship newspaper, The Bend Bulletin,
and its sister publications since soon after a previous bankruptcy filing in 2011.
That
conclusion arises from a review of new information filed in federal court in
Eugene as Western proceeds with its latest attempt begun in late January to
stave off creditors and continune operating under Chapter 11 provisions of the
federal bankruptcy code.
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| Western to hire broker to to sell newspaper operations |
And
the most recent documents ask the court to approve listing for sale all newspaper
operating assets and real estate of Western’s seven publications, including the
company’s Bend headquarters building and printing facility.
A
“summary of schedules” in the bankruptcy signed Feb 12 by Chairwoman Elizabeth
McCool estimates assets of $26,716.074.31 and liabilities of $29,235,636.31.
Notable
in the document is $2,568,119 in unsecured loans by insiders, including executives
and board members, provided to the company beginning as early as 2012. The
document also lists a "loan from" an insider of $277,967.17 in 2008 as an asset under "notes receiveable" but designated as “doubtful or uncollectible.”
By
far the most capital infusion to the company by an insider since the previous
2011 bankruptcy were loans totaling $1,877,119 by Chairwoman McCool, the largest
of those dated February of 2018 for $1,250,000. Another line item in the filing
shows that McCool was owed $46,267.64 in accrued interest on the loans.
These
amounts are in addition to trust deeds recorded January 15, barely a week
before the Chapter 11 filing, that totaled $253,000, the largest issued to
McCool for $160,000. Those deeds are
secured by interest in Western’s 87,000 square foot headquarters also housing The
Bulletin’s offices at 1777 SE Chandler Avenue, which the bankruptcy lists at a
value of $20 million.
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| Western's balance sheet for Chapter 11 filing |
In
the initial filing only Sandton
Credit Solutions Master Fund III, LP, and First Interstate Bank,
formerly Bank of the Cascades in Bend, were listed as secured creditors. Sandton,
of New York, holds the headquarters loan, listed as a value of approximately
$18.84 million, and has a claim on other assets including real estate connected
to Western’s other publishing properties.
First
Interstate was intially listed in an earlier Chapter 11 document as a secured
creditor, but the most recent summary of schedules notes it has an unsecured note
of $163,945.37, dated 2013.
All
creditor claims of the newspaper are subject to liens, including those filed by
counties in which some Western properties operate. But neither Deschutes
County, Western’s home base, the IRS nor state of Oregon have filed liens as of
early March. The company owes the IRS $322,164 for 2015-2016 including Affordable
Care Act penalties, and $1,051,489.97 in federal payroll taxes for May-July
2018.
In
its latest plea to the court, Western has asked to list its newspaper operating
assets with Dirks VanEssen Murray & April, a prominent Santa Fe based media
broker, and its real estate assets with Capacity Commercial Group LLC of
Portland. The brokers will work on a commission fee based on successfull sales.
The
document notes Western anticipates payments of $35,000 monthly from February
through November to its Portland attorneys, Tonkon Torp, in addition to
$125,000 in fees incurred prior to the initial bankruptcy petition.
Also
in the compensation list, Western notes that Mountain Group, a business consulting
company with a Camp Sherman address, has incurred $66,925 in fees from January
22 through February 15. Mountain Group would be paid another $38,000 for services
in February and then $24,000 per month from March through November of 2019, or
a total of $320,000.
The
headwinds facing Western, The Bulletin and its sister publications are sweeping
across the media landscape, with daunting challenges to legacy and mainstream
print media but also affecting cable and digital-only news.
Among
trends with struggling newspapers is the advent of what industry experts call “vulture
capitalists,” hedge funds and private equity groups with little or no media
experience who sell off valuable real estate assets and gut publishing
operations.
One
of the most prominent examples is New York based Alden Capital, which through a
subsidiary sold off real estate assets of the Denver Post, at one time the
dominant newspaper of the Rocky Mountain West, and has eliminated dozens of
news positions.
Former
Post reporters and editors, including some who defected after the layoffs, have
formed the digital-only Colorda Sun with funding through a national company
that aims to rescue faltering print media.
In
Western’s case its 87,000 square foot Bend headquarters building could well
attract interest as the region continues to grow, but any buyer will have to
factor in the costs of converting to more convential commercial uses.
The
$20 million estimated bulding value in the Chapter 11 filing is most likely inflated
over what a buyer would pay. On its tax rolls Deschutes County lists the
building’s real market value, or RMV, at $9.741,880.
Even
as it struggles to surive and perhaps find a buyer, Western is moving to remake
The Bulletin as a more compact newspaper with emphasis on local reporting, as
editor Erik Lukens wrote in a February 17 edition.
The
paper will have fewer national or international wire service stories and
various features and sections will be rearranged or eliminated.
Whatever
the Bulletin’s future, given the challenging economics of the media industry, and
especially for newspapers, possible survival will probably be as only a shell
of its current form—and even that is much diminished from its banner years as
the primary news source of the region.
One
media expert whose advises companies on efficient use of advertising budgets
compared Western’s current uphill battle as, “rearranging deck chairs on the Titanic.”
