Central News-Wave Publications Inc. and its sister company, Eastern County Newspaper Services Inc., publishers of 39 twice-a-week newspapers that serve primarily African American and Latino neighborhoods in greater Los Angeles, have filed for Chapter 11 Bankruptcy Court protection while they attempt to shed at least $1.4 million in debt and restructure to become an employee-owned company.
The companies, both owned by the Brian Hews family, filed for protection from creditors June 9 in U.S. Bankruptcy Court in Los Angeles. Together the companies put out free publications known informally as the Wave newspapers, which include the Inglewood-Hawthorne Wave, the South Gate Press and the El Sereno Star. Total circulation is estimated at 250,000.
Publisher and Executive Editor Art Aguilar said the filings stemmed largely from years of slumping advertising revenue coupled with rising production costs.
Aguilar said the reorganization was also meant to allow the companies to restructure and give their combined work force of 80 employees a 40% stake.
"The former ownership weren't succeeding in getting out of it what they would have liked," Aguilar said. The exact nature of the new ownership plan has not yet been worked out, he said.
The move would make the 76-year-old chain, based in South-Central Los Angeles, one of the few employee-owned companies in the economically depressed area. "A lot of our employees live in the communities we serve," Aguilar said. "We will really be a true community newspaper owned by people in the community."
Eventually, Central News-Wave and Eastern will be consolidated into a new company to be called Wave Community Newspapers Inc., the publisher said.
According to the Chapter 11 filing obtained Wednesday, the companies hope to pay off their debts through $3 million in financing from the Los Angeles Community Development Bank. About a third is to come from a secured term loan, while the rest will be in the form of equity investment.
Before that plan is approved and implemented, however, the companies have asked Bankruptcy Court Judge Lisa Hill Fenning to allow them to use cash collateral from their accounts-receivable lender, Finova Capital Corp., to pay the chain's day-to-day operating costs.
According to the filing, "failure of the court to permit such use, which has been consented by Finova, may result in the shutdown of the debtor's operation. . . . [T]he motion is made on the grounds the debtor has no immediate source of financing other than the cash constituting the collateral of Finova."
A 20-day budget included with the filing shows the companies' expenses outpace total sales by $23,000.
The companies said they do not expect any publishing disruptions during the reorganization.