Digital First Media, owner of the Los Angeles Daily News, was selected Sunday as the bidder to beat in an auction for the assets of Freedom Communications, the bankrupt owner of the Orange County Register.
Digital First submitted a $45.5-million offer that was chosen as the “stalking-horse” bid by FTI Consulting, a Los Angeles business management firm working with creditors, said Ron Hasse, publisher of Digital First's Los Angeles News Group.
The offer will set a floor price for the auction to be held Wednesday.
Tribune Publishing, owner of the Los Angeles Times, and an insiders group led by Freedom co-owners Rich Mirman and Eric Spitz, backed by Orange County developer Mike Harrah also have submitted bids for Freedom. They will be allowed to sweeten their offers at that time, if they choose.
U.S. Bankruptcy Court Judge Mark S. Wallace has scheduled a March 21 hearing in Santa Ana to approve the sale of Freedom's assets, which include the Riverside Press-Enterprise. The sale is expected to close by the end of the month.
The bid from Digital First, which owns nine newspapers in Southern California, declined to assume Freedom's pension obligations.
The federal Pension Benefit Guaranty Corp., which guarantees private-sector pensions up to about $60,000 per year, said in court documents that if no buyer is willing to take on the pension plan it would have a claim of $155 million against Freedom's estate. That would imply the pension plan is dramatically underfunded.
"The liability obligations are excessive, and we are only bidding on the assets," Hasse said in an emailed statement.
Tribune Publishing has raised its own questions about the pension plan and has requested a court hearing to look into its investments.
Digital First will put down a $4.5-million deposit for its stalking horse bid. If outbid, it will receive that money back, get a break-up fee of $1.13 million and up to $200,000 in expense reimbursements, Hasse said.
Freedom filed for bankruptcy protection in November following an ill-fated and aggressive expansion of the company's print publications by greeting card entrepreneur Aaron Kushner and Spitz, who acquired the company in 2012. Kushner left the paper last year.
Harrah and Jeremy Rosenthal, an attorney for Tribune Publishing, declined comment.