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By TIM DORAN Wescom News Service
Western Communications, the parent company of The Union Democrat, emerged from bankruptcy protection Wednesday with the acceptance of its reorganization plan in U.S. Bankruptcy Court in Portland. In a hearing lasting about 10 minutes, U.S. Bankruptcy Judge Elizabeth Perris confirmed the plan that calls for full payment to creditors and ends a three-year dispute between Western Communications and its largest creditor, Bank of America. “It’s done,” said Betsy McCool, chairwoman of Western Communications. “We’ve been planning for this. We’re ready to move forward.”
Bank of America declined comment Wednesday, according to an email received from Shirley Norton, listed by the bank as a media contact for legal issues. “We believe the court documents speak for themselves and have no comment,” the email stated. “As you know, we have been working with the company for some time to help them resolve their financial issues.” The plan accepted Wednesday calls for all claims to be paid in full and sets out the terms. All employee compensation, benefit, retirement programs and health care plans also will continue. All creditors that filed ballots voted in favor of the reorganization plan, according to a summary filed by Western Communications’ attorneys from Tonkon Torp in Portland. Western Communications, which also owns a newspaper in Crescent City, Calif., and five newspapers in Oregon, filed for bankruptcy Aug. 23 under Chapter 11, which allows a company to reorganize and continue operating. The bankruptcy essentially stemmed from the dispute with Bank of America over terms of loans and a line of credit Western Communications obtained to pay for company building construction and presses and to buy The Union Democrat. Loan agreements required Western Communications to meet certain profit ratios. When the company failed on two separate occasions, once in 2007 and again in 2009, Bank of America called in the note and essentially doubled the interest rate, to about 12 percent. The rate eventually dropped nearly 3 percentage points, but the additional interest and fees cost Western Communications about $2 million. The company filed its first reorganization plan and disclosure statement in November. It called for repaying Bank of America, the largest creditor, over 30 years at 4.5 percent interest. Bank of America, whose claim has reached about $20 million, according to court documents, objected in early January. The bank said Western Communications’ first plan failed to explain how it would meet future payments, given that “the traditional hard-copy newspaper business is currently facing an existential challenge to its very future,” Mark Northrup, attorney for Bank of America, wrote in the Jan. 3 response. In an amended plan, Western Communications stated that small and medium-sized newspapers have an excellent future. It mentioned a study conducted at the University of Missouri that readers prefer to get their news from community newspapers and pointed out that Warren Buffett, CEO of Berkshire Hathaway Inc., has invested in the industry, buying the Omaha World-Herald. Western Communications has also moved into digital media, according to the company’s amended disclosure statement, signed by Gordon Black, president of Western Communications. Western Communications’ second largest creditor, Page Cooperative, a nonprofit association that helps negotiate discounts for newsprint and other supplies for its members, has a claim for about $603,000. All other claims listed in the plan, except for administrative expenses, total about $125,000, according to court records. No objections to the amended plan were filed, and all those with an interest in the case approved the plan, Black said. An attorney for Bank of America attended the hearing via telephone, he said, instead of traveling to Portland from his office in Seattle. The plan becomes effective July 1, Black said, but with the judge’s confirmation Wednesday, the company can now fully focus on economic conditions rather than the bank. “We’re moving forward,” he said. |