The Unsecured Creditors Committee in the bankruptcy case of the Alaska Dispatch News and owner Alice Rogoff has a few problems with the sale of the newspaper to the Binkley Company. They’ve listed their concerns with the Federal Bankruptcy Court.
Their biggest problem, it appears, is that Alice Rogoff has listed herself as a creditor and says the newspaper owes her $12 million.
They’re concerned that she could be paid before they are. Together, the unsecured creditors are owed as much as $2.5 million.
The creditors in the group are those in line after Northrim Bank to get money that Rogoff owes them. Rogoff owes Northrim about $10 million.
They aren’t likely to get paid under the sale, if the newspaper sells for the $1 million that has currently been bid by the Binkley Company. Binkley will get the first $1 million, because the court allowed the company to bail out the Dispatch with a $1 million loan.
Northrim is first in line to get the next $10 million or so. The bank is the only secured creditor.
There’s little likelihood that anyone would bid that much for the newspaper, however.
The court has indicated a likelihood that the Chapter 11 (reorganization) bankruptcy will go into Chapter 7 (liquidation) after the newspaper sells. Everything will get sold off. Attorneys will get paid. The auctioneers will collect their checks. Not much will be left.
“Given the extreme losses of the Debtor, the UCC does not oppose the concept of a sale, but does have concerns about the process that led to the Binkley purchase, and thus the inside track Binkley obtained, and also concerns about the handling of any excess proceeds (above the DIP credit),” the objection reads.
[DIP is Debtor in Possession — the $1 million loan by Binkley.]
The lawyers for the unsecured creditors writes that Binkley is paying “an alarmingly low amount for the assets it is purchasing, which includes a sizable ongoing business– revenues of over $20,000,000 per year.”
The business is on track to lose more than $8 million this year, however.
“Comparing the $1,000,000 price being paid to the scheduled values provided by the debtor for all of the assets (approximately $11,800,000 according to the latest filed Summary of Assets and Liabilities) leads one to scratch their head and ask ‘why so low?'” the creditors’ lawyers write.
The group is saying that on paper, the paper is worth more than $1 million.
The head-scratching creditors say the sale is moving too fast and they just retained counsel, so none has had time to examine the actual value and assets of the business.
They also assert that Rogoff has been keeping the entire operation intact, rather than reducing her operating costs, further putting the business in peril:
“It appears that Ms. Rogoff continued to operate the business due to her political and community desires rather than out of a profit motive,” the creditors assert.”She continued to operate the business for a substantial period of time after losses began, and funded these losses until she decided not to do so.”
In other words, she ran the business as a hobby, or perhaps in her mind as a philanthropy, not as one that intended to pay its bills.
“Given her desire to continue the viability of the ADN platform, the UCC has concerns whether she desires to obtain the highest price for the assets, or rather find a buyer who will retain the integrity of the paper for the community.”
Here, the creditors are questioning whether retaining a newspaper for the community is a higher purpose than paying dozens of small business owners.
“This is an admirable motivation, but she has stopped the music and left many small, local vendors without a chair and holding the bag. Ms. Rogoff and ADN owe a duty to creditors and not just the idealistic notion of retaining the newspaper and platform.”
The creditors say that if another bidder surfaces, then market forces will push the price higher, and they hope they’ll be made more whole.
The group is additionally not satisfied with the late filings by Rogoff’s attorney Cabot Christiansen. Those 11th-hour filings have not given them a chance to digest and react to Rogoff’s decisions, they say.
The creditors, led by Mark Miller of M&M Wiring, believe that Northrim’s secured claim, which was obtained in March, may constitute a “fraudulent transfer” and would therefore be subject to recovery.
Further, the group says Northrim has the ability to and therefore should go after Rogoff’s personal assets:
“Northrim has various collateral grants from Ms. Rogoff, including her marital settlement payments, which are reported to be very substantial, and her Wells Fargo investment accounts, estimated at $1,700,000. There may be additional collateral that secures the Northrim debt, that has a balance of approximately $10,000,000 at this
time. Under the doctrine of marshaling, the court can force Northrim to look to Ms. Rogoff and the collateral she has pledged for Northrim’s debt satisfaction. This would leave the value of ADN estate assets for the unsecured creditors.”
In other words, Northrim should be directed by the court to go after her secret stashes of funds and streams of income, which have not yet been made available to the court or creditors to inspect.
The Unsecured Creditors Committee is being represented by the law firm of Dorsey & Whitney.
The newspaper will be auctioned Monday, Sept. 11, at approximately 9:30 a.m., with Rogoff’s attorney Cabot Christianson presiding over the auction.
Bids over $1 million will start at $1.2 million and then go in $100,000 increments.