Freedom Communications says it's coming out of bankruptcy
The company is still the owner of the beleaguered East Valley Tribune, the Orange County (Calif.) Register, and about thirty other newspapers and eight TV stations. The Register reports:
Freedom Communications’ reorganization calls for the company to more than double pretax earnings to $98 million within four years. [Interim Chief Executive Burl] Osborne said that improvement will be achieved by:
Continued efficiencies in management and operations. One example already implemented is joint newspaper delivery with the Los Angeles Times
Revenue growth, especially from online activity, such as an existing partnership with Yahoo
Improved coordination among divisions within the company
Joint efforts with other media companiesOne example of that last point might be shared printing agreements among Southern California publications, but Osborne does not expect Southern California to wind up with one regional newspaper.
The company brought its problems on itself, by lading up with too much debt. One good side of the story is that the remaining members of the Holles family are now out of the picture.
A confirmation hearing is scheduled for March 9, at which a write down of just under a half-billion dollars will be finalized.
As Nick Martin reported on Heat City some time ago, the company’s was gifting a lot of its execs with bonuses, even as it was capsizing. Details here.
11:49 PM
EVT sale finally going through
A complete disaster seems to have been avoided in the East Valley. The Tribune, which might have closed entirely at the end of the last year, has been rescued, sort of, by a company called Thirteenth Street Media, which is based in Boulder, Colorado.
The owner of Thirteenth Street, Randy Miller, also owns a weekly paper it distributes to the tonier areas of North Tucson and a weekly called the Telluride Daily Planet in Colorado. Stories from Tucson make it seem like the former is a slight outfit and getting slighter.
On the other hand, the latter, the Telluride paper, doesn’t seem to be a silly operation. It’s not an easy feature to get going or to use, but it does boast an “e-Edition” that lets you see what the actual printed paper looks like, and it seems to carry actual news, despite its small circulation.
On the other hand, there are still a few hitches in the giddyup web-wise, as this this About Us page demonstrates.
Nick Martin has a lot of details on the sale in Heat City:
Under the just-announced deal, Miller would get the three newspapers, their printing presses and the building in Sun City occupied by Daily News-Sun, as well as all the trimmings that go along with owning a newspaper, such as its fleet of vehicles and use of trademarks.
Noticeably missing from the deal, however, is the Tribune’s headquarters in downtown Mesa, which the county government says is worth almost $7 million.
In exchange, Miller would pay $2.05 million. But he would also take over an operation which Freedom said is losing about $60,000 a week.
Any deal is still subject to approval from the federal bankruptcy judge in Delaware who is overseeing the case. The same judge will also be choosing from among the bids if others decide to compete against Miller.
Other bidders have until March 8 to submit their offer. A hearing will be held the following day to discuss the sale, and the judge could decide as soon as then whether to allow the deal to take place.
A superficial PBJ story on the sale here. It says that the Telluride Daily Planet is a weekly. All I could find in the Republic is this four-graf story.
How embarrassing is it that an unpaid blogger like Nick Martin completely out-reports the newsrooms staffs of two established news organizations on a business story involving an institution—a newspaper—that’s obviously part of a lot of people’s daily lives?
Despite its impressive win of a Pulitzer last year, for a series on Joe Arpaio, the Tribune has lost many employees in the last year and now publishes just three days a week.
It may or may not be true that the EVT is losing $60,000 a week. (A company like Freedom can make any sort of financial case it wants.) And it’s possible that the ancillary publications will help out. Still, it’s hard to believe a company the size of Thirteenth Street is prepared to carry any losses very long, and that’s not including the issue of how much debt it’s taken on to finance the deal. (Even in newspaper fire sales, debt is killing a lot of recent deals.)
All that said, $60,000 is the equivalent of some 60 employees. Even if the new owners can somehow find some internal savings that had eluded Freedom, it’s hard to see how it’s repositioning the paper for the future isn’t going to include some significant new layoffs.
2:54 PM
What's up at the EVT?
Here’s the feature well of the East Valley Tribune’s site right now:
The top story—the cop tragedy in Gilbert—is two days old. The bottom one is about … a book reading at a library? From the outside it looks like the paper isn’t staffing its website over the weekend.
8:43 PM
Le Templar's goodbye column
The opinion pages editor is leaving the EVT to join the Goldwater Institute.
Loyal Tribune readers know of the newspaper’s challenges over the past year — the switch in January 2009 from a metro daily to a community paper with a smaller staff, company bankruptcy in September, the Nov. 2 announcement of a pending closure followed a couple of weeks later by a proposed sale that has yet to be completed.
Today, I have a great deal of hope for the Tribune’s future. But I won’t be there in the Mesa newsroom to see what happens next. I am taking advantage of a rare opportunity to join the staff of the Goldwater Institute, a public policy institution (what reporters used to call a political think tank) that shares the vision and values that the Tribune’s editorial pages have pursued with vigor for so long.
7:06 PM
Kicking the EVT while it's down, continued
Granted it’s a holiday, and granted there’s an enormous amount of pressure on the folks inside the East Valley Tribune—they don’t know, week to week, if they’re gong to have jobs.
But here again is the main feature well of the paper this a.m.:
I’m assuming the web site has something programmed into it to generate the feature well by taking the top stories from two different departments. But as we saw last week and again today, it’s maybe not smart to let the front page of a web site be created without human intervention.
7:00 AM
Potential East Valley Tribune sale is expanded
The East Valley Tribune is reporting that its long-discussed sale to Thirteenth Floor Street Media has been delayed because the company is negotiating to get the EVT’s sister papers in the Valley as well:
The new letter of intent also includes assets of the Sun City Daily News-Sun, Ahwatukee Foothills News and Arizona Interactive in Chandler, which publishes the Clipper advertising shopper and does commercial printing. The Daily-News Sun also publishes the Glendale/Peoria Today and Surprise Today newspapers.
The deal expanded because the operations are so closely intertwined, Freedom said in a statement.
Thirteenth Street owner Randy Miller was expected to be in the Valley this week visiting the staff at Freedom locations.
More details on the new developments at Heat City.
7:00 AM
Joe Arpaio being investigated by a grand jury—a federal grand jury
The papers are all atwitter with confirmation that the U.S. attorney is finally going ahead with an investigation into the crackpot sherrif’s office being run by Joe Arpaio. Seems like Channel 5 broke the story:
Maricopa County Manager David Smith and County Budget Director Sandi Wilson both said they had been subpoenaed to appear before a grand jury next week to testify about their interactions with the Sheriff’s Office.
As PHXated has noted before, this (inevitable) development and its probable denouement (Arpaio’s indictment on a slew of offenses) will make a lot of the timid coverage of Arpaio’s actions, particularly in the national media, seem a little embarrassing.
An interesting question will be whether the process, which could take months, will at all cow Arpaio’s behavior. ON the one hand you can bet not: his success has been built thus far on blustery denials and bullheaded actions.
Still, his professional life will be made much more difficult as his henchmen lawyer up and start to realize how legally vulnerable their crackpot leader has made them.
The Channel 5 report says specifically that the jury is targeting Arpaio’s use of his police power to retaliate against his political critics.
A wrenching sign of how strained things are at the EVT: The Tribune’s story on this key development … is an AP story.
7:00 AM
You hate to kick the EVT while it's down ...
.. and granted, it’s New Year’s weekend. Still, here’s the front-and-center well of its front page this a.m.:
p.s.: Heat City is reporting that the paper’s editor, Chris Coppola, is leaving—for an editing job at the Arizona Republic.
1:59 AM
High-wire act at the EVT
The publisher of the East Valley Tribune has posted a letter on the status of the paper’s pending sale. The news in the letter is … there is no news:
To Our Readers,
This week we have received a number of inquiries regarding the future of your newspaper. Because we value your trust in us and the relationship with all our readers, we wanted to provide a brief update.
While we have not yet reached a final agreement with Thirteenth Street Media for the sale of the Tribune, we remain in active discussions with them working to conclude the final details of a sale.
Please know that we will continue to publish and distribute the Tribune and provide our customers and readers with excellent service just as we always have while these discussions continue. Our Phoenix-area Web sites will also continue operating normally during this period.
Thank you for your continued support.
Sincerely,
Julie Moreno
Publisher, East Valley Tribune
Two months ago, the paper’s bankrupt owner, Freedom Communications, said it would close at the end of the year. Three weeks later, Thirteenth Floor came into the picture. Background on what’s happened since here.
7:00 AM
The bright side of the decade from hell
Chris Coppola, the editor of the East Valley tribune, tries to limn it in a commentary today. He acknowledges the wars and economic troubles that have marked the past ten years, but makes this case:
[…] I’m not convinced the ’00s were all bad for us locally. The progress made in developing our freeway system and introducing light rail in the East Valley, along with ongoing improvements at Gateway and Falcon Field airports in Mesa, and Chandler’s municipal airport, will pay major dividends for this region down the road. History has proven that an efficient transportation system is a major key for any area’s economic health.
We’ve also seen an explosion of new hospitals and medical facilities and expansion of higher educational facilities — all the types of things that add to quality of life and prove attractive to new industries looking to set up shop with varied, and well-paying, jobs.
He goes through each town in his subscription area and notes the steps each has taken to position itself for the future.
My only complaint: In such a Republican area, in reviewing the crises of the decade he could have noted the failures of that party, both philosophically (in how, for example, its distaste for regulation helped create the housing and financial mess) and politically (an utterly failed president, a dismaying 2008 presidential candidate).
Don’t get me wrong: If anything, PHXated despises Democrats even more than Republicans. And I’m rooting for both Coppola and the paper. But it doesn’t help anyone not to utter some simple truths.
The future of the EVT, incidentally, remains in doubt, Heat City reports:
Earlier this month, a spokesman for the Mesa newspaper’s parent, Freedom Communications, said Dec. 24 would likely be the day the company would tell a federal bankruptcy court about the deal it hopes to strike with a Colorado businessman wanting to buy the Tribune.
But late Thursday, after nothing had been filed with the court, company spokeswoman Maya Pogoda said attorneys “have not finalized the agreement” with hopeful buyer Randy Miller.
7:00 AM
The buyer of the East Valley Tribune is asking staffers to re-apply for their jobs
Things don’t look good. Nick Martin writes in Heat City:
First, [Thirteenth Street Media owner Randy] Miller asked employees which position they are applying for – a problem because Miller has not said which positions might be available.
Later, Miller asks applicants to include three references, but he adds one instruction: “Please do not include relatives or former employers.”
No former employers, you say? So who does he want listed? Friends? Community leaders? A journalist’s sources? It’s unclear.
We should prepare for some grim holiday news from the East Valley Tribune. The smart business move is to radically downsize the serious staff and let the malleable souls remaining keep the thing filled with business-, advertiser- and government-friendly newsblurbs.
That, coincidentally, is what the company did when it took over a paper in Tucson called the Explorer. Here’s a former staffer quoted in the Tucson Weekly talking about where things were headed:
[The new editors] asked me and Oro Valley reporter Patrick McNamara if Marana and Oro Valley had [public information officers], and we said, “Yeah.” Do they send press releases? Do you put them in the paper? “No, not always. It depends on what it is. We never run a press release from a PIO.” They seemed a little taken aback by that. I quipped that most of the press releases for Marana were, “Come take a picture of this cactus we just planted.” Everyone else seemed to chuckle, but when they didn’t chuckle, I sort of knew I wasn’t going to be a part of these guys’ plan."
I can’t imagine the EVT was losing a lot of money. Its current owner, Freedom Communications, has claimed only that it had been “unprofitable” for the last two years. You can view that as a careful choice of words; on the other hand, the company is in bankruptcy, so maybe the word doesn’t have a special meaning. On the third hand, the company was loaded down with debt and might have been trying to unload a paper that wasn’t losing money just to raise cash.
The big question is how much debt Thirteenth Street is taking on to accomplish its own acquisition. The poster child for this scenario is Tribune Company, which took on oceans of new debt solely for the purpose of the privilege of being owned by Sam Zell. It, too, is in bankruptcy.
The EVT is a serious newspaper right now; if Thirteenth Street is rigorous in the cost-cutting, it can coast on that reputation (and the reflexive ad buys) for a while before folks really start noticing the decline in quality. In the meantime, again, its hard to see how a lot of local journalists won’t be facing a tough holiday.
7:00 AM
A buyer for the EVT?
A buyer for the East Valley Tribune, slated to close at the end of the year, has been found, publisher Julie Moreno told employees today.
The paper’s owner, Freedom Communications, is in bankruptcy and said two weeks ago that it would shut the paper down at the end of the year after a suitable buyer could not be found.
EVT story here.
The only discomfiting thing about the news is that … we don’t know who the new owner might be:
The buyer was not identified.
Moreno said the buyer has indicated they plan to keep a “substantial” number of Tribune employees.
In a conference call with Tribune employees Friday from Freedom headquarters in Irvine, Calif., Moreno said she has not had any conversations with the buyer about how the business will operate in the future, “but it’s my understanding the intention is to continue to operate the newspaper and Web site.”
More on the sale at Heat City.
If the buyer ever officially materializes and the deal actually goes through, this is great news for the paper’s employees, who were facing a grim new year.
Whether the paper can financially support itself after the deal is the hard part. Freedom’s in the trouble it’s in because it over-leveraged itself buying up new properties, and found itself with its financial pants down after the economic downturn.
Let me underline this point, because it’s not often mentioned in stories about the state of the newspaper industry: Up until very recently, most newspapers made a lot of money. Even in an economic collapse the papers should have been able to get by. (I guess we have to take the word of Freedom that the EVT has been unprofitable for the last two years, but I’d also like to see the sort of money it was throwing off up until 2007.)
But variations of expansion and acquisitions have burdened them with excessive debt, and that’s what’s killing a lot of them.
Now, Freedom is a special case. Some of the family ownership was smart and unloaded about half their interest about five years ago, in a deal that saw a couple of private-equity groups take a 40 percent share.
A WSJ story on the issue said this deal entailed a “relatively small” amount of debt. But here’s an example of how the numbers are working: That same story said the company’s revenues were down fully 75 percent—but it still was earning $50 million. (Note that it was making some $200 million a year until recently.)
Now, that’s not an enormous figure for such a large company (which owns dozens of small papers and eight TV stations).
But when their corporate ownership is leveraged up to its keister, two things happen. One, the papers’ profits are devoted to paying off the companies’ debt. (Which is to say, the profits are going to pay the bill for the privilege of being owned by the financial manipulators who put the deal together.)
That mean the profits aren’t going into making the property better; when the owners themselves aren’t getting their money first, they have even less impetus to sink money into the papers—and that gives subscribers less reason to stay with them.
And two, the leverage gives the papers no breathing room. The advantage of being held by a private company is that in theory you can weather troubled times and think long term without pressure from stockholders to maximize short-term profits. That’s not happening any more.
Here, it seems Freedom’s owners will be wiped out; they’ve supposedly already written off close to $500 million.
The big question about the new owner is: How much debt will it be carrying?
The answer to that question will tell us whether we’ll be reading the same stories a year from now.
12:00 AM
Freedom Communications: Bankruptcy ... and executive bonuses
Over at Heat City, Nick Martin has a list of execs at Freedom Communications who got bonuses, even as the company headed toward bankruptcy.
Freedom holds about 30 newspapers and eight TV stations across the country, including the East Valley Tribune, which announced last week it would close at the end of the year. The bankruptcy is a reorganization plan; the company as a whole isn’t going out of business. It was just a way to help it deal with nearly a billion dollars in debt it ill-advisedly built up.
As PHXated has noted before, before you cry tears for the newspaper industry, remember that it brought most of its problems on itself.
… Which makes the bonuses all the more appalling. Top execs were apparently getting more than $100,000 each—just for helping to run the company into the ground.
Heat City is here. The list of bonuses is here.
12:00 AM
EVT to stop publishing at the end of the year
The East Valley Tribune had tried slashing staff and even cutting publication to three days a week, but was finally forced to give up, the paper’s publisher told staffers today, according to Heat City.
The paper is owned by the Freedom chain, based in Orange County, California, which is in bankruptcy. Reports Nick Martin:
The closing makes the Tribune the second Arizona newspaper to shutter this year. In May, the state’s oldest newspaper, the Tucson Citizen, was shut down by its owner, Gannett. The Citizen has since become a local blogging website for the media chain.
“This is probably the most difficult decision a company can make,” Freedom CEO Burl Osborne said in a news release. “But ultimately, after considering all available options, this is the best alternative for our company.”
The paper won a Pulitzer Prize this year for its lacerating series on Joe Arpaio, “Reasonable Doubt.”
Martin has more details on the closing here.
12:00 AM
Did you know the East Valley Tribune won a Pulitzer Prize?
It’s funny to me how many people I ask who don’t know that. New Times story about it here. Part of the reason is the way the Arizona Republic, in an awesome example of journalistic poutiness, buried the news about the award last May.
Arizona seems to live in a dream world sometimes. The most popular politician in the state runs an organization so compromised a local paper wins a public service Pulitzer for examining just a small part of it—and it does not become part of the public debate.
I mention this only to note that the East Valley Tribune may be being sold, after a year that, despite the Pulitzer, has already seen a wrenching downsizing: 140 staffers let go, publication trimmed first to four days, and now three days, a week.
Freedom Communications, the national chain based in Orange County, is in bankruptcy, and the news at the end of last week is that it is asking the court to let it sell off some assets, among them possibly the EVT and a few smaller local papers—the Sun City Daily News-Sun and Ahwatukee Foothills News.
The EVT’s story about it here.
The more I read the EVT, the more I like it. Hard to argue with this account of the company’s financial problems:
In its bankruptcy filing earlier this month, Freedom listed debts of nearly $1 billion. Much of that was incurred in 2004, when the company bought out some members of the Hoiles family, which has controlled the company since its founding more than 70 years ago. Two outside investor groups financed the buyout.
In recent years, the company has seen a steep decline in advertising revenue and increasing competition from the Internet, as have most newspaper companies across the nation. The situation was made worse by the onset of the latest national recession. As a result, Freedom defaulted on its debt obligations.
Emphasis added. The lesson here is the insane amount of debt Freedom and so many media companies took on in the earlier years of this decade. People get sentimental about daily newspapers, rightly or wrongly, but we shouldn’t lose sight of the fact that most of the daily journalism companies in true financial straits right now got there through bad business decisions unrelated to the current financial downturn or, truth be told, the decline of the industry overall.
More on that little hobby-horse of mine here.
Reporter Nick Martin, one of the staffers laid off earlier this year, writes in more detail about the issue here on his blog Heat City.
p.s. I realize the EVT has a lot of problems to deal with right now, but I feel I have to note it’s another one of the local papers whose web site is mighty glitchy. Here’s what I got when I used the site’s seach engine to find its story on the latest news about its parent company:
Here’s a closeup of the results:
And the links all resolve to weird Google Reader pages.
Search for the same thing through Google News, however, and it comes right up.
Similarly,when I searched for the word “arpaio” to get the link for the paper’s Pulitzer Prize-winning series, I got this:
The search engine should be key-worded so that any search for Arpaio should produce a master page with the series and recent articles nicely laid out.
Now, anyone at the paper would doubtless sigh when asked about this, making the valid point that with 140 recent layoffs, resources were stretched thin.
To which one would still have to reply: So why weren’t these basic web issues done before the operation borrowed a billion dollars to buy out its owners?
6:00 AM