An unknown number of the employees of Alaska’s largest news organization appear poised to join about 180 businesses and independent contractors suffering because of the bankruptcy of the Alaska Dispatch News/ADN.com.
If the federal Bankruptcy Court on 9-11 approves the sale of the state’s largest newspaper to the Binkley Company LLC or some other company, everyone at Dispatch other than editor David Hulen will be immediately out of a job, according to a memorandum Dispatch lawyer Cabot Christianson filed with the court on Tuesday.
What happens next will be up to the new owners of ADN.
Given that there are now questions arising as to who the owner might be (see below), the Christianson memo stipulates only that the ADN.com “buyer may offer employment to whichever of (Dispatch’s) current employees buyer desires. Employees who accept such offers will become employees of the buyer. (Dispatch) employees whom buyer do not desire to employ, or who do not accept buyer’s offer of employment, shall be terminated according to (Dispatch’s) severance policies.”
Hulen, according to earlier court filings, negotiated a contract that attaches him to the company no matter who the new owner.
The Dispatch now employs about 210 people in it news, advertising, production, circulation, business office and printing departments. Some, seeing what is coming, have already left for work elsewhere.
Severance checks for those who stayed and appear destined to lose their jobs are expected to match their existing compensation for one to six weeks of work. The length of employment will dictate the size of the check. Long term employees will leave with a sum equal to about a month and a half of their regular pay. The shortest term employees will get a week.
About $2 million is owed the company’s more than 150 unsecured creditors not counting former Washington, D.C.-area resident Alice Rogoff. She claims the Alaska company she started owes her about $8 million. Most of the unsecured creditors are expected to get nothing. Any money coming out of a sale will flow first to Northrim Bank, a secured creditor to whom Rogoff owes about $10 million.
“I’ve been bilked by a billionaire,” Mindy Fisher Leary, the co-owner of an Anchorage shoe store posted on her Facebook page today. “The Dilettante From D.C. waltzed into town some years back, overpaid for a local newspaper to make it her left wing mouthpiece, and produced mostly rot-gut fake news for years. Now she’s gone belly up owing me a whopping $118.96 for some boots the paper purchased from us this year.
“Frankly….I would had given her far more than that to leave town years ago….”
Rogoff, the estranged wife of billionaire David Rubenstein, one of the country’s richest men, for years financed the internet start-up Alaska Dispatch.com, which was eventually involved in the $34 million purchase of the Anchorage Daily News.
After Dispatch.com and the Anchorage Dailys News/ADN were merged into the newly formed Alaska Dispatch News/ADN, Rogoff was told she needed to size the staff to what revenues would support, but she refused. She expected to quickly grow the business into an Alaska media empire. The plan didn’t work.
Newspaper company executives who been involved in analyzing the ADN’s finances say they believe the newspaper needs to cut costs by 30 to 35 percent if the newspaper is to survive as a business. ADN is on track to lose about $8 million this year, but a significant part of that loss is tied up in rent due GCI, an Anchorage telecom company, and the costs of a failed effort to fire up a new press.
When Rogoff bought the Daily News from McClatchy in 2014, she sold the Daily News building on Northway Drive to GCI for $15 million. Rogoff needed the cash from the sale to cover the high purchase price for the newspaper.
When she made the deal, she had no plans for a new press but 18 months to get out of the GCI building before the rent started ratcheting steeply upward to encourage her to leave.
At an ADN-staff holiday party more than a year after the sale, she announced there had been a “Christmas miracle,” and a new press had been obtained. In March 2016, almost two years after the purchase, she took to the pages of the Dispatch News offer this:
“News flash, first: We are buying a higher-quality printing press that will be in place later this year. With so many of you still loyal readers of our print newspaper, this will give you reassurance that we’ll be printing for years, and perhaps decades to come. Thanks to this different press, the paper will be more colorful, somewhat redesigned, and vibrant in new and different ways. We are planning for at least 15 more years of printing the paper at a new location in Anchorage.”
She planned for the new press to move into “a site we hope to occupy by fall. Stay tuned for us to tell you where it is, and even to schedule tours for the public.”
Happy days end
The press was subsequently moved into a building on Arctic Boulevard. It never printed a single newspaper. The building is now the subject of litigation because ADN refused to pay the electrical contractor hired to prepare the building for the press.
“That construction was beset with problems,” Christianson wrote in the Tuesday bankruptcy memorandum. “The installation of the press has not been completed, and there is no path towards that press ever working.”
The newspaper continues to print in the old Anchorage Daily News building now owned by GCI, but that company’s patience is wearing thin.
“How best to handle the issue of use and ownership of the press and other equipment at the GCI premises has been a thorny issue,” Christianson wrote. “Currently the press, and other equipment, located at the GCI premises are owned by the (ADN).
“GCI has no interest whatsoever in having the press remain at the Northway location for more than a few months. GCI is willing to let the buyer stay for a few months until the buyer can find an alternative printing solution. Once buyer leaves the GCI premises, the press and other items in that space need to be removed. The cost of removal far exceeds the value of the press itself once the press is removed. Alice Rogoff has already personally guaranteed the cost of removal.”
That cost has been estimated at up to $1.5 million. Rogoff, in her negotiations with McClatchy, agreed to pick up the press disposal and other Daily News costs that added significantly to the already steep purchase price of $34 million.
Since the ADN bankruptcy was announced on mid-August, the Binkley company, which loaned ADN $1 million to avoid an immediate shutdown, has been running the company as a debtor-in-possession, but Rogoff forbade it from making any of what newspaper analysts consider vital budget cuts to financially stabilize the ADN.
The expense of running the operation is outlined in Christianson’s Tuesday filing.
“Assuming that the sale contemplated by this agreement… is approved at the Sept. 11, 2017 hearing in the bankruptcy case,” he wrote, the deal could close by Sept. 14 at which time the “buyer shall be responsible for the approximately $380,000 payroll due Sept. 22 on account of the two-week pay period ending Sept. 14.”
That two-week cost would reflect an annual payroll of about $9.9 million per year. Bankruptcy court records indicate the company generated about $23 million in revenue last year. Payroll is the biggest part of a newspaper’s cost because covering the news is a labor-intensive business.
As a general rule, established newspapers expect to spend about 40 percent of their revenue on payroll every year. At that rate, the Dispatch News would appear to be spending at least $700,000 too much on payroll.
But the problem is bigger than this because the Dispatch News is not an established newspaper. It is newspaper paying high rent to house one press it vitally needs in a building it doesn’t own while up until recently spending heavily on a construction plan to shoehorn two presses into another building it didn’t own.
If the Dispatch had been able to solve its press problem last year, there is a possibility, some in the newspaper business say, that it might have been able to save itself. But by the start of this year with no new press in sight, the ADN was in serious trouble.
When Rogoff decided she’d had enough with the cost of trying to build an Alaska media empire and quit subsidizing the operation early in 2017, its debt snowballed and the company accelerated toward the bankruptcy filing. Rogoff tried to sell but couldn’t. She was ready to close the doors and walk away when the Binkley family, owners of a sizeable Fairbanks tourism business, stepped in to try to save the day.
They loaned the Dispatch $1 million to keep it in operation for a month and started making plans to acquire the newspaper and financially rework it into a viable business. Now, however, it appears they might have competition.
As Christianson noted in the Tuesday filing, “in the event another interested person or persons desire to purchase the newspaper on better terms than Binkley, then the (Dispatch) proposes to hold an auction.”
Two names have since surfaced in regards to other interested persons: Canadians Roland McBride and Steven Malkowich.
The Alberta Newspaper Group (ANG) is 59 percent owned by Glacier Media Group, a Vancouver, British Columbia, Canadian publishing powerhouse, according to the Financial Post, a Canadian business publication.
Horizon is a small, Illinois newspaper chain owned by David Radler, the chief operating officer of Hollinger International until he and Canadian friend Lord Conrad Black ended up in trouble with the law.
“…Adler started out with his own little papers in Canada and wound up publisher of the Chicago Sun-Times and COO of Hollinger International, where prosecutors say he and his longtime (until recently) pal Conrad Black pocketed money hand over fist,” the Chicago Reader reported a decade ago.
Both Radler and Black did some time in jail. Radler later went to work for Glacier Media. He ran the Victoria Times Colonist for the company in the early 2010s, according to The Guardian, which describes that newspaper as “a subsidiary of Glacier Media.”
At that time, The Globe and Mail of Canada reported that Radler was quietly running the “Alberta Newspaper Group Ltd. from an office in Vancouver. The company owns three daily newspapers – the Lethbridge Herald, Medicine Hat News and Sherbrooke Record – and dozens of smaller publications. It is a subsidiary of Glacier Media, which bought the Victoria Times Colonist.”
Though the Alberta Newspaper group was not mentioned in the sale of a California newspaper in 2015, Malkowich, who works for ANG, was linked to that sale of the family-owned Lodi News-Sentinel in the Central Valley. In a story published on the web page of the Poynter Institute, a journalism think tank, it was reported the purchasers’ identities were being shielded by a “non-disclosure agreement,” but “the publisher will be Canadian newspaper executive Steven Malkowich, who will run it through a newly constituted entity called Central Valley News-Sentinel Inc.”
On the News-Sentinel website, it was reported “the new owners have newspaper assets in the United States and Canada, including several in California….Malkowich and his investors have a track record of commitment to local community newspapers.”
Malkowich’s Linkedin page lists him simply as an “executive” at “ANG,” a Vancouver-area company in the newspaper business. It notes his past employment at the Glacier Media Group and Hollinger, the Adler-Black company.
Malkowich most recently was involved in the purchase of the 11,000 circulation Antelope Valley Press in Palmdale, Calif., in June.
Editor & Publisher reported the sale to “a new corporation, Antelope Valley Press Inc., led by veteran newspaper publisher Steven Malkowich. The new owners have newspaper assets in the United States and Canada, including several in California. The terms of the transaction were not announced.”
Malkowich was reported to be in Anchorage today exploring options for printing the ADN. The lack of a press complicates any ADN sale. Any new owner will need to either obtain the ADN presses and move them into a suitable building or contract to have the newspaper printed elsewhere.
The contract options are limited with Anchorage Printing being the most likely printer. It now prints a number of small Alaska newspapers.
Correction: Attorney Cabot Christianson’s last name was misspelled in the original version of this story.