The owner of the Riverside Press-Enterprise is threatening legal action against publishing entrepreneur Aaron Kushner if he fails to make good on his offer to purchase the newspaper.
The $27.25-million deal had been set to close Friday. But the Press-Enterprise's owner, A.H.
"A.H. Belo and the Press-Enterprise Company are pursuing multiple options to promptly consummate the disposition," the company said in a statement.
Belo said it was still open to closing the deal with Kushner but would also consider negotiating with other potential buyers.
Kushner, a former greeting card company executive, last month announced plans to purchase the Inland Empire's largest paper with considerable fanfare.
The move was applauded by the newspaper industry. Analysts viewed it as a sign that Kushner's plan to invest in print publishing while others are cutting costs is paying off.
In the last year Kushner — who bought the Register, along with two other Southern California papers, in July 2012 — has hired several hundred new editorial staffers, created new sections and launched a separate daily in Long Beach.
The Press-Enterprise appeared to be another component of that strategy.
On Nov. 1, however, Belo said the original Oct. 15 deadline to close the deal had been pushed back a month. In addition, it included new provisions requiring Kushner to show he was financially solvent and to pay $1 million in cash to keep the deal open.
Late last week, Belo asked Press-Enterprise employees to fill out time cards only through the beginning of this week, according to numerous sources at the paper. That was seen as an indication that a transfer of ownership was imminent.
Yet Friday's deadline passed with no news. Belo's announcement is the strongest indication yet that Kushner is having difficulties closing the deal. It comes amid speculation that his company is facing financial challenges.
Freedom stopped contributing to employees' 401(k) retirement plans early this year. Kushner also has acknowledged that its papers have missed multiple financial targets and that the company has not turned a profit this year.
Kushner financed the acquisition of Freedom, which cost $50 million plus the assumption of more than $110 million in pension obligations.
His lender, Crystal Financial, specializes in loans to high-risk borrowers and interest rates that can top 11%. Officials at Crystal have repeatedly declined to comment on the status of that loan.
Despite Kushner's emphasis on print, the Register's circulation has been slipping. That's a particularly troubling development in the case of the Sunday edition, which represents the majority of revenue. As of September, the Register's Sunday circulation stood at 267,121, down from 277,936 in September 2011, according to data from the Alliance for Audited Media.
In addition, Kushner has been taken to court several times over aspects of the Freedom acquisition. Most recently, investment firm Angelo, Gordon sued over $17.5 million from the original deal that Kushner has refused to pay. (Angelo, Gordon is a part owner of the
Belo did not elaborate on the possibility of suing Kushner to enforce the terms of the sale agreement. If the deal were to fall through, Belo would keep the $1 million that Kushner already pledged, which is nonrefundable.
A collapse of the Press-Enterprise sale could tarnish Kushner's reputation and undermine his expansion plans.
For Belo, meanwhile, a blown deal would be a very public embarrassment. The company has been attempting to unload the Press-Enterprise for some time. It chose Kushner over numerous potential suitors with far more experience in the media industry.
Belo has twice said it would consider negotiating with other bidders if the deal with Kushner fell through, but it has not named any of those parties.
In recent years, Belo has significantly cut staffing at the Press-Enterprise, which serves one of the most economically challenged regions of the country. This summer, it sold the paper's building for nearly $30 million in a separate transaction; editorial, business and advertising employees are to be moved to leased office space in the near future.
"I want to sincerely thank all of the employees of the Press-Enterprise for their unwavering support and dedication during this process," Jim Moroney, president and chief executive of Belo, said in the company's statement. Belo also owns the Dallas Morning News and the Providence Journal.
Belo shares were up 10 cents, or 1.4%, to $7.30 on Monday and remained unchanged in after-hours trading.