Receiver sought for O.C. Register
The Orange County Register building in Santa Ana.
Two investors in Freedom Communications are asking a Delaware court to put the Santa Ana newspaper company into receivership, saying the owner of the Orange County Register is “insolvent” and beset by “mismanagement.”
The lawsuit by minority shareholders is the latest sign of strife at a company that this year has endured rounds of layoffs, lawsuits, leadership shake-ups and the launching and closing of a new daily paper in Los Angeles.
Abbey Financial and Old Colony 2012 Investment Fund said in their complaint, filed confidentially with the Delaware Chancery Court last week and disclosed this week, that Freedom needs independent oversight as soon as possible.
The investors said the operation faces an emergency “posed by an imminent sale of a significant real estate asset and the financial distress of the company due to mismanagement.”
The complaint alleges that Freedom co-owners Aaron Kushner and Eric Spitz allowed lender Silver Point Finance to have outsized influence over the media company’s financial decisions, including a planned sale of a 14.3-acre plot surrounding the Register’s Santa Ana headquarters.
Initial offers on the site were due on Oct. 22, said Justin Esayian of the Hoffman Co., the brokerage representing Freedom. Freedom didn’t set an asking price but received a substantial number of offers, which it is reviewing, Esayian said.
Abbey and Old Colony supported the land sale a year ago, said Freedom spokesman Eric Morgan. He called their complaint “meritless and unfounded” and said Freedom is not considering filing for bankruptcy.
Morgan said, the court rejected the investors’ motion Thursday to expedite the appointment of a receiver. Attorneys for the investors did not respond to requests for comment.
In alleging that Freedom is insolvent, the complaint said the company has spent at least the past nine months “placating” creditors that have been pressuring the firm “to the detriment of other creditors.”
Silver Point, a subsidiary of Silver Point Capital in Greenwich, Conn., holds the mortgages on all of Freedom’s real property as well as a first priority lien on the company’s other assets, according to the complaint.
Abbey and Old Colony, both in Massachusetts, accused Kushner and Spitz of having “abdicated their independent decision making responsibilities in favor of the company’s lender.”
A Silver Point spokesman declined to comment.
The complaint cited two examples of the company’s inability to pay off loans and other obligations “as they become due in the ordinary course of business.”
As one example, the investors alleged that Freedom defaulted on a loan from Silver Point, though the exact amount of the loan remained confidential in court documents.
The complaint also referred to a lawsuit filed by the Los Angeles Times in mid-October accusing the Register of breach of contract and failure to pay about $2.5 million in fees for delivering the newspaper. The Times suit alleged that the Register been falling behind in payments since 2013.
The Times, which alleged that damages may exceed $4 million, terminated its distribution agreement with the paper in early October after the Register switched to other vendors.
In an email, Kushner said The Times “refused to guarantee uninterrupted delivery of our paper.”
After Kushner’s 2100 Trust bought Freedom two years ago for a reported $50 million to $60 million, the company went on a hiring spree, rolled out two new daily papers and bought the Riverside Press-Enterprise for nearly $27.3 million.
One of those new dailies, the Long Beach Register, now is published on Sundays only. The other, the Los Angeles Register, was shuttered in September, five months after it launched.
Along the way, dozens of employees have taken buyouts or been laid off.
Freedom sold the Register’s headquarters for $27 million in September to developer Michael Harrah and then leased back the space. Harrah said last month that he also was negotiating to purchase the land nearby.
Last month, the Register named former casino executive Richard Mirman to replace Kushner as publisher, which some analysts said was a move to soothe increasingly uneasy investors.
“Things are starting to catch up with Aaron Kushner every which way,” said Gabriel Kahn, a USC journalism professor.
