This is a developing story
The prospective new owners of the Alaska Dispatch News are warning a federal bankruptcy court judge that the state’s largest newspaper and news site – ADN.com – could be dead by Sept. 20 if some sort of interim financing plan isn’t approved at a hearing today.
The Binkley Company, a Fairbanks-based tourism business owned by the Binkley family – has proposed a $1 million loan to Dispatch owner Alice Rogoff to keep her failing newspaper temporarily in business, but they want the loan attached to a stipulation that will assure they get their money back.
What they have proposed is linking the loan to the purchase of the business and requiring anyone who might bid on the newspaper to pay off the loan as part of any offer for the Dispatch News. Meanwhile, they have signed an agreement with Rogoff agreeing to buy the paper from her for up to $1 million.
If the bankruptcy court were to eventually agree to the proposed Rogoff sale to the Binkley group, she would be legally bound to use the purchase price to pay back the Binkley loan.
A bankruptcy trustee has questioned that deal, suggesting it gives the Binkleys and their partner, Alaska Media LLC, too much leverage in bankruptcy proceedings and stiffs creditors.
Creditors left out in the cold aren’t happy either.
But the Binkley group argues this is the only way to prevent the newspaper from being shut down. Since Rogoff bought the former Anchorage Daily News for $34 million three years ago, she has been losing money at the rate of $4 million to $8 million per year.
The once-profitable business is now more than $2 million in debt, behind on payments to its health insurance provider, and short on ink and newsprint. Rogoff, for her part, says she no longer has the resources available to prop up an operation that loses $150,000 dollars per week.
The Binkleys cut a deal with her on Saturday to let them buy the newspaper contingent on the bankruptcy filing and the bankruptcy court approval of the loan.
Without that deal, it’s quite possible Anchorage newspaper subscribers would have awoken on Sunday to find their newspaper missing, and Alaska’s largest news operation shuttered.
The deal before the bankruptcy judge today is complicated and difficult in that the Binkleys are already taking a sizable risk in buying a newspaper that has been bleeding money and is in danger of eviction from the building that houses its print press.
Unless the Binkley Group can get some protection on the loan, it would be doubling down on the risk.
“To make this very clear, the Binkley Company is not prepared to loan more than
$1 million to (Rogoff)” unless that loan is “secured by a super-priority lien,” a lawyer for the Binkley’s wrote in a motion filed with the court shortly before noon today.
“(And) that means that the (Rogoff) sale has to be approved by September 20 because it is in that week that (the company) no longer has the funds to meet its September 23 payroll.”
Attorney Erik LeRoy agreed with the a bankruptcy trustee’s view that the Binkley loan to Rogoff and the Rogoff sale to Binkley are “intrinsically intertwined”, but not for any nefarious reason.
The Binkley group, he argued, is just trying to do its best to keep Alaska’s largest source of new and information – as the Dispatch News like to brand itself – from dying without losing its shirt in the process.
“This case is about whether Chapter 11 of the Bankruptcy Code can be used to transfer title to a newspaper’s assets from one owner to another without paying the
creditors of the first owner,” he wrote. “It is an unfortunate circumstance that the newspaper is bleeding so badly that all assets will be used to pay employers, vendors and lessors and there will likely be no assets for the more than $2 million of pre-petition creditors.
“The alternative of dismissal and liquidation is grim.”
Some of the creditors have questioned that. They argue they might at least get some return if the Dispatch News is liquidated, and the parts and pieces sold. The company own computers, desks, delivery trucks, photography equipment, and what not.
The website ADN.com, which traffics in the eyeballs of millions of viewers, is conceivably the most valuable asset, but who might be willing to buy that or for how much is unclear. A hearing before the bankruptcy judge is set for 2 p.m. in Anchorage.
“If a sale on short time without financial benefit to creditors is going to be a
problem, then Binkley Company would like to know that now,” LeRoy wrote. “Binkley Company recognizes that the (Rogoff) seeks fast-track approval for the proposed sale, but there are exigent circumstances which amply support the Debtor’s desire for prompt approval of the sale. The quantity and quantity of financial information that has been supplied to date, and which will continue to be supplied, is considerable, and the sale will not be approved before the schedules are filed and creditor’s meeting held.
“As (Rogoff) suggests in its motion, the beneficiaries of this sale are
employees, vendors who will receive future sales, and the citizens of the State which
will not lose its largest newspaper.”
Rogoff has argued the survival of the Dispatch News is “vital to all Alaska.”