The Quay County Sun's parent, Freedom Communications, Inc. in Irvine, Calif., continues in talks with its lenders about restructuring $770 million in debt, Freedom officials said Sunday.
The Wall Street Journal reported Sunday that Freedom would file Chapter 11 bankruptcy reorganization this week, but Freedom officials would only say that discussions were ongoing.
"We're working with our lenders," said Burl Osborne, Freedom's interim chief executive, who took over the reins of the company after former CEO Scott Flanders left to head Playboy Enterprises Inc. June 30.
The Freedom papers are expected to continue publishing without interruption, even if the company files for bankruptcy.
In an interview last month, Osborne said a consensual bankruptcy, in which Freedom and its 26 lenders would agree in advance to a restructuring, was a possibility.
Under a restructuring, the banks would swap a major share of their debt – perhaps $500 million or more – for a controlling interest in the company.
In a Chapter 11 bankruptcy, the company's operations continue while details of the restructuring are worked out under the oversight of the bankruptcy court.
Osborne said during his July interview that efforts were being made for the Hoiles family, which has owned the company since 1935, to retain a minor interest in the company. The Freedom papers are expected to continue publishing without interruption.
Freedom owns 33 daily newspapers, including QCSun, Portales News-Tribune, Clovis News Journal, more than 70 weekly newspapers, magazines and other specialty publications and eight television stations.
The company's financial woes stem from a long-simmering family feud that ended in 2004 with the buyout of disaffected family members who wanted to cash in their shares in the closely-held private company. Two private equity companies, the Blackstone Group and Providence Equity Partners, bought a minority share in the company for $467 million to help fund the buyout. Under the proposed restructuring, Blackstone and Providence would lose their investment.
If Freedom files for bankruptcy, it would be one in a growing list of media companies that have sought relief from debts under bankruptcy protection. Tribune Co., owner of the Los Angeles Times, and the owners of the Philadelphia newspapers are among the media companies that filed Chapter 11 bankruptcy in the last year.