Freedom Communications and its subsidiaries which own its TV stations and newspapers have filed in federal bankruptcy court for reorganization under Chapter 11. The company plans to cut its huge debt load by half, but the result will be that its lenders will wind up owning nearly all of the company’s equity.
“This announcement is positive news for the Company and all of our associates, who have been making extraordinary efforts to transform our business, as well as for our customers and the communities that depend on us for critical information,” said Freedom CEO Burl Osborne. “Reaching this agreement with our lenders provides us with an orderly process to re-align our balance sheet with the realities of today`s media environment,” he added.
Under the pre-packaged reorganization plan, Freedom will cut its senior debt from more than $770 million to $325 million. In all, Freedom said in its Chapter 11 filing documents that its total debt is a bit over $1 billion.
It is pretty easy to sort out the financial winners and losers in this case. Members of the founding Hoiles family who demanded in 2003 that the company be sold, and were then cashed out by their cousins, are still wealthy. The cousins who maintained the family legacy are essentially wiped out. They will split a 2% equity stake in the restructured Freedom with their private equity backers, Blackstone Group and Providence Equity Partners. The Hoiles/Blackstone/Providence investors will also have warrants to buy up to 10% of the shares of the new company.
Company officials say business will continue as usual for Freedom’s eight television stations, 33 daily newspapers and 70 non-daily publications. But soon the employees will be working for new owners – primarily JP Morgan Chase, SunTrust Banks and Union Bank of California.