TRUSTEE FOR DISPATCH CREDITORS OBJECTS TO DEAL
The Trustee appointed to represent the many creditors of the Alaska Dispatch News has posted an objection to the settlement that owner-publisher Alice Rogoff has presented.
In a written statement, the acting United States trustee Gail Brehm Geiger and her attorney Kathryn Perkins say that they can’t immediately determine if the only “secured creditor,” Northrim Bank, would even approve of having unsecured creditors paid before the bank is paid.
The trustee doesn’t speculate, but it’s clear Geiger is making a point that the Alaska Dispatch News, and much of Rogoff’s other assets, are collateral for her $13 million loan with Northrim. The secured creditor always comes first, and it appears she owes the bank in excess of $10 million.
Can, then, the court decide that Premera, an unsecured creditor, get payment first? Why not any other unsecured creditor, such as GCI, Precision Mechanical, or even her own attorneys, who are on the list of top-20 creditors?
The trustee is also saying in the objection that the matter is being rushed, and that not all potential interested parties have had a chance to review and consider the proposed settlement:
“The hearing on the Debtor’s DIP Financing Motion is occurring very shortly after the bankruptcy petition was filed and without the benefit of the Debtor’s schedules or statement of financial affairs,” the trustee wrote. “Most parties in interest have not been given notice of the case or the first day motions.
“Hence, the United States Trustee will oppose any action that substantively affects parties’ rights on a final basis. With respect to each of the motions, the United States Trustee will advocate that the Court grant interim relief only to the extent necessary to avoid irreparable harm between now and the time that a final hearing, on notice to all parties in interest, can be conducted.”
The trustee goes on to say that Rogoff’s petition reflects estimated assets of $10-$50 million and liabilities of only $1-410 million, “suggesting that the Debtor may be solvent…”
That is just the first objection.
The trustee goes on to say that the Binkley Company, led by Ryan Binkley and Jason Evans, by taking over the operations of the newspaper and loaning it money, has become more of an “insider,” and thus may “chill” the interest of any other potential purchaser of the newspaper at auction because Binkley can cut the funding at any time.
Also, with Binkley running operations, the trustee said that all of Binkley’s transactions with Rogoff are now subject to a higher level of scrutiny “because of the opportunity for abuse.” That means as insiders they are become a subject of interest to all the creditors.
The duties of a “Debtor in Possession” are at odds with Binkley’s interest in getting the newspaper at the most rock-bottom price, the trustee says, citing the example of how another potential purchaser could begin negotiating with the Dispatch’s landlord and the landlord might prefer that purchaser, and then refuse to negotiate further with Binkley.
If that happened, the trustee says, Binkley could simply cease its Debtor in Possession financing and leave the newspaper without the ability to reorganize, and also it would put Binkley in the first position for compensation of the amounts it had already expended.
The trustee is telling the court that authorizing a loan from Binkley to the Dispatch would at the same time prohibit Binkley from terminating the court-approved financing agreement, and that Binkley could not refuse to provide the funding in the agreement without another court hearing, during which Binkley would have to explain why it wanted to cut funding.
The trustee also questions whether Binkley constitutes a “good faith lender,” because Binkley is not at an arms length, but is actually attempting to purchase the company. The trustee explains that the decision by the court will have “substantial and lasting implications for creditors going forward,” and that the burden of proof about good faith lending is on Binkley.
In closing, the trustee reiterated her concern about whether Binkley is now an insider in control of the Dispatch and its operations. As such, the Binkley Company could no longer try to negotiate deals for the newspaper that would jeopardize the positions of the current creditors. The trustee is going to want to know about each and every transaction.
Meanwhile, if Rogoff doesn’t pay her newspaper carriers today, few of them will show up tomorrow to deliver the paper.
[Read: Dispatch seeks court help to allow news carriers to get paid]
The court may decide that the hundreds of newspaper carriers would need to join the already 200-plus creditors — including insurance companies — that Rogoff owes, since each news carrier is considered an independent, self-employed contractor. If so, will the judge decide that those creditors should be paid before all the other ones that are already suing her?
As I understand it’s time to stop payment on my online subscription to the ADN as the party’s over turn out the lights. Under these circumstances I would imagine that rescuers become very hesitant to throw away money.
The deeper you dig into ADN the more one may conclude that there is little chance it can be successfully reorganized under Chapter 11. Rogoff and Brinkley are asking the federal bankruptcy judge to allow preferential treatment of certain unsecured creditors at the expense of secured creditor Northrim bank. And preferential treatment between unsecured creditors. If Rogoff after knowing she would be filing bankruptcy, and before doing so, paid off some unsecured creditors because she favored them for some reason, it would be called a “preference” and set aside by the judge. I cannot imagine a judge allowing it after filing for bankruptcy unless he was clearly convinced that the business would be successfully reorganized and all creditors stood a far better chance by allowing such preferential payments. But success is unlikely here. Binkley’ million dollars will be eaten up by GCI, health insurance, and by current wages almost immediately. Then what? The debts continue piling up with inadequate revenue to support the business. Meantime advertisers are leaving and subscriptions are going down. Fast! Has Binkley / Evans shown that they can put another Multiple million dollars into the business? Do they have the patience that will be needed. And given the trustee’s opposition to them acting in their present capacity, can they be involved at all. Their insider information and influence on the financial status of the business could prevent the creditors from being paid by another entity interested in owning the paper.
Rogoff’ claiming that the business is worth over $10 million in “good will” is laughable. A business that makes a strong profit and expected to continue doing so and that has been around and has a competitive edge may have some good will when determining a sales price. One like Rogoffs which has no tangible assets to speak off, huge debt, and which is pending bankruptcy has NO good will. And finally while GCI may be put off from collecting back rent, how can a judge in good conscience prevent it from at least reclaiming its property. The case is after all an eviction matter together with a claim for back rent. There seems no defense to the eviction claim!
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