Court OKs Plan for Foothill to Give UPI Funds
United Press International won federal court approval Tuesday of a plan to allow it to meet its payroll and continue operating with a line of credit from Foothill Capital Corp., its Los Angeles-based banker.
Attorneys for the financially strapped worldwide news service, which filed Sunday for protection under Chapter 11 of the U.S. Bankruptcy Code, told U.S. Bankruptcy Judge George F. Bason Jr. that Foothill has agreed to advance the company an additional $4 million to help cover its debts.
Richard Levine, UPI’s chief bankruptcy lawyer, said the wire service and Foothill have agreed on “a budget with which the company can live” and that may enable UPI to make a profit after 22 straight years of losses.
In approving interim financing, Bason turned aside a plan by the company’s principal owners to sell the wire service for $10.8 million in cash to a group of investors headed by a Miami savings and loan executive. Levine told Bason that such a move is illegal while the firm is under the control of a bankruptcy trustee.
Progress Reported
Steven Rubin, a Washington attorney representing the potential buyers, refused to identify them beyond saying they are headed by Pedro Lopez, president of General Federal Savings & Loan of Miami. Rubin said that “substantial progress toward final agreement has been reached” and that the cash payment could be made by Friday.
Levine told the court that UPI has $21.8 million in assets and about $45 million in liabilities, with revenue of $92 million.
More information also was revealed Tuesday about why UPI decided last Friday that it had to file for protection from creditors. The Internal Revenue Service had acted Friday to seize any future UPI revenue to recover about $1.9 million in fines and unpaid payroll taxes that the wire service owes from the fourth quarter of 1984.
The IRS sent all UPI customers letters, many of which were received Tuesday, ordering that future payments to UPI be sent directly to the IRS. The news service decided to enter bankruptcy proceedings to block the seizure of its revenue. A week earlier, the IRS had taken the less dramatic step of filing a lien against UPI’s assets as collateral against the unpaid taxes.
UPI’s decision to file for bankruptcy protection also was influenced when Foothill earlier last week cut off the wire service’s critical line of credit, leaving UPI unable to meet its payroll. Foothill attorney Stephen F. Biegenzahn confirmed Tuesday that Foothill had cut off UPI’s credit because the IRS lien pushed Foothill from first to second on the list of creditors.
As a result of Foothill’s action, Levine said, many of the wire service’s 1,300 employees had gone more than two weeks without a paycheck. He added that, because of the new financing, the overdue checks should be issued by late today or Thursday.
Bason also rejected a move by Nashville businessmen Douglas Ruhe and William Geissler to block the interim financing. Gary Jacobs, an attorney representing Ruhe and Geissler, said that UPI managers led by Chairman Luis Nogales had--in filing for bankruptcy protection--voided an agreement in which Ruhe and Geissler relinquished management of the wire service last March 7.
Also on Tuesday, UPI was considering a second round of personnel cuts. Sources said the agency might even reduce the number of reporters in 22 states to one per state. On Friday, UPI announced that 80 employees were being laid off.
Times staff writer Thomas B. Rosenstiel also contributed to this article.
