The owners of United Press International agreed after an all-night meeting and under pressure from their banker Thursday to hand over control of the financially imperiled international news agency to their employees and creditors.
Douglas Ruhe and William Geissler, the little-known Nashville, Tenn., businessmen who bought UPI two years ago for $1, agreed to relinquish operating control to Luis Nogales, the president whom they had fired on Sunday during a disagreement over restructuring the company.
The agreement, however, leaves the survival of the 78-year-old news agency--the last American general wire service besides the Associated Press--far from assured.
The plan, worked out in a 21-hour session in Los Angeles, proposes that major creditors forgive some of at least $25 million in unpaid bills in exchange for equity in the company.
The bulk of those creditors, however, have not even seen the proposal nor have they indicated whether they might approve it.
"As far we know, no offer has been made to us," said John Geoghegan, a spokesman for American Telephone & Telegraph Co., one of UPI's four largest creditors. "We have received no formal word."
Officials at RCA Corp. and American Express Co., two of UPI's other largest creditors, have said they have had little contact with UPI throughout the current crisis. So far, no meeting with creditors has been scheduled.
Under the plan, insiders estimate that UPI will offer certain major creditors roughly 40% of the company. The three largest creditors in that block are AT&T;, RCA and American Express. This group is owed at least an estimated $17 million.
Another 15% of the company will be offered to Foothill Capital Corp., a Los Angeles-based venture-capital firm. Foothill was involved in negotiating the plan. The lender, which has agreed to keep open UPI's critical revolving line of credit, is owed an estimated $7 million, but UPI spokesman Bill Adler said the company still intends to pay off Foothill.
Senior management and employees would each receive another 15%, with Ruhe and Geissler sharing the last 15%. It is unclear what would happen to the roughly 4% owned by minority partners.
Adler cautioned that these numbers are only estimates, the details of which UPI will negotiate with the creditors.
The reorganization also calls for the return of four other key members of Nogales' management team: financial consultant Ray Wechsler, who was fired with Nogales on Sunday night; Bob Brown, the vice president for communications, who resigned after Nogales was fired; Jack Kenney, vice president and controller, who also resigned, and Steve Spritzer, a budget officer, who also resigned.
The agreement also calls for a four-person board of directors at UPI, which will include Nogales, employee union President William Morrissey, UPI Editor-in-Chief Maxwell McCrohon and Ruhe.
Foothill played a major role in persuading Ruhe and Geissler to submit to the agreement. UPI employees said Foothill on Monday stopped UPI's revolving line of credit--threatening to force the company into bankruptcy--if Ruhe and Geissler did not agree to rehire Nogales and to accept the reorganization plan.
The Wire Service Guild, which represents UPI's 900 domestic news employees, issued a statement Thursday saying that "some $300,000 worth of payroll checks bounced during the period between the firing of Nogales by UPI co-owner Douglas Ruhe on Sunday and when Nogales was reinstated this morning." Management was instructing employees Thursday to redeposit the checks.
Richard Pattison, an official of the Newspaper Guild representing the Wire Service Guild in the negotiations, told UPI reporters Thursday that after Nogales' firing "there didn't seem to be much alternative but that they UPI would wind up in bankruptcy, whether they did so voluntarily or the creditors forced them into it."
UPI executives were optimistic Thursday. "Everybody is upbeat," Managing Editor Ron Cohen said in Washington.
"We are confident that the creditors will find this plan attractive and will adopt it," Nogales said in a prepared statement. "In the meantime, UPI will have sufficient cash to operate normally."
The agreement was almost completed Tuesday night, but insiders said Ruhe backed out at the last minute. Although employees said they understood that several items were renegotiated Wednesday and early Thursday, Ruhe and Geissler's future liability for UPI was apparently a major issue.
UPI's financial problems are long standing. E. W. Scripps Co., which had owned it from its inception in 1907, could not find a buyer for the news agency in 1982 and instead gave it to Ruhe and Geissler for $1--even giving them roughly $10 million to operate it--in exchange for being freed of liability if UPI failed.
Ruhe and Geissler, whose only asset is an Illinois television station valued at $10 million, lacked the resources to expand and sold several assets over the last two years to raise funds.
The losses became too much last fall, and management persuaded employees to accept pay cuts starting at 25% while they sought a new investor. Prospective partners, however, showed little enthusiasm for UPI as long as Ruhe and Geissler were in control, insiders said.