The opening salvo in a potential war for the Orange County Register was launched in Bankruptcy Court on Wednesday, with an attorney for the owner of the Los Angeles Times calling for an “open sale process” for the rival, struggling newspaper.
The move could set up a contest for Register owner Freedom Communications between Tribune Publishing and a management-led, local ownership group that already has expressed desire to buy the company out of bankruptcy.
“It sounds like, in bankruptcy, there’s suddenly a bidding war for this newspaper,” said Gabriel Kahn, co-director of the Media, Economics and Entrepreneurship program at USC’s Annenberg School for Communication and Journalism. “It makes a lot of sense for Tribune to be in the hunt. I can’t think of another buyer for whom this property is more valuable than Tribune Publishing.”
Tribune Publishing signaled its interest when its attorney, Jeremy Rosenthal, told U.S. Bankruptcy Court Judge Mark S. Wallace that the Chicago-based newspaper publisher was willing to offer Freedom Communications $3 million in the form of a refundable deposit to finance its operations during bankruptcy.
If Tribune Publishing “or an affiliate” does not emerge as the winner of Freedom’s publishing business, which includes the Riverside Press-Enterprise, Tribune would be refunded the money out of the sale proceeds to another buyer, Rosenthal said.
The Los Angeles Times is a creditor in the case. Last fall, The Times sued the Register, saying it had failed to pay at least $2.5 million it was owed for delivering its papers.
Hedge fund Silver Point Capital, a much larger creditor, also is offering $3 million in financing to keep Freedom operating. Its offer is based on the condition that $19 million in existing debt would be refinanced, giving it a senior status for repayment.
Rosenthal objected to Silver Point’s offer, telling the judge that Tribune wants an “opportunity to bid at a fair, open, transparent proceeding.”
Tribune spokesman Matthew Hutchison declined to elaborate on the company’s plans. A Silver Point spokesman declined to comment.
Freedom filed for Chapter 11 bankruptcy protection Sunday after suffering more than $40 million in losses over the last two years under new ownership. The company was acquired in 2012 by an investor group led by former greeting card executive Aaron Kushner, who bet heavily on print, starting two newspapers in Long Beach and Los Angeles that were later closed.
The financing offer by Tribune, which surprised those gathered in the Santa Ana courtroom, marks the strongest indication yet that the owner of The Times might consider purchasing the Register and Press-Enterprise.
By picking up those papers, Tribune would be a dominant player in the Southern California media market, from San Diego to Los Angeles. In May, the company bought the San Diego Union-Tribune, forming the California News Group with the Los Angeles Times.
In addition to The Times, Tribune owns the Chicago Tribune, the Baltimore Sun and several other daily newspapers.
Media analysts said that by acquiring the Register and Press-Enterprise, the owners of The Times would gain significant efficiencies combining some operations.
Analyst Ken Doctor called the Register a “linchpin” for Tribune.
“It has to do everything it can to try to win that prize, given its strategic location between The Times and the U-T,” he said.
Doctor said The Times and the San Diego Union-Tribune currently account for just under 40% of Tribune Publishing revenue. If Tribune adds the Register and Press-Enterprise, those four papers would account for roughly half of Tribune Publishing revenue.
Lynn LoPucki, a UCLA law professor and an expert on bankruptcy, said bankruptcies such as these are often complex and lengthy but that the companies can be sold within months.
The creditors would then fight over the proceeds of the sale.
Tribune would face competition in its bid.
The investor group that includes current Freedom Chief Executive Richard Mirman and developer Mike Harrah is leading an effort to buy Freedom’s assets out of bankruptcy. Mirman told employees he was confident his insider bid would emerge victorious.
Harrah owns the Register’s building in Santa Ana. He made an offer on the land surrounding the Register, but that deal fell through.
The next hearing in the case is scheduled for Nov. 13.