Journal Register Company Files for Bankruptcy
Journal Register Company, a local news and information enterprise run by Digital First Media, has filed for Chapter 11 business bankruptcy in a New York US Bankruptcy Court. The company will seek a bankruptcy sale at auction, but will continue to operate in the meantime.
“We expect the auction and sale process to take about 90 days, and we are pleased to announce the Company has a signed stalking horse bid for Journal Register Company from 21st CMH Acquisition Co., an affiliate of funds managed by Alden Global Capital LLC,” said John Paton, Digital First Media CEO, in a press release.
The Bankruptcy Auction
A bankruptcy auction is when a company gets court approval to sell selected assets to other bidding companies and individuals in hopes of boosting the value of the bankruptcy estate. A bankruptcy sale refers to the sale of any real estate listed in the filing; the money from this property is then used to pay the outstanding debts.
In Journal Register's case, 21st CMH Acquisition Co. is already positioned to buy most of the company's assets through a "stalking horse agreement", which is when a bankruptcy debtor uses a pre-auction bid to increase the market value of their assets for the upcoming auction.
When either a company or an individual files for bankruptcy, what is known as an automatic stay is placed on creditors. This means no creditors included in Journal Register's Ch.11 filing can make attempts to collect outstanding debts from the business while their filing is underway. They will not be required to make loan payments or other debt payments until the bankruptcy is complete and a repayment plan has been designed. If any creditor continues to take collection actions, that creditor can be held in contempt of court and be subject to paying damages to the debtor.
Journal Register Employees
Journal Register Company, which operates from New York City, manages more than 350 multi-platform products in 10 different states, reaching an audience of 21 million Americans each month, according to their website.
When a large company such as this files bankruptcy many people wonder how it will affect the company's employees. With a Chapter 11, business proceeds as usual so it is unlikely that employees will feel any of the financial strain, at least during the sale process. In addition, the Company reports that high-level managers will not receive bonuses or increase in pay for their work relating to the bankruptcy filing, as they did in a previous bankruptcy only four years ago.
Not the Company's First Bankruptcy
In 2009, The Journal Register entered its first Chapter 11 filing with a roughly $225 million debt restructuring plan. This debt included leases, pensions and other liabilities “that are now unsustainable and threaten the Company’s efforts for a successful digital transformation,” according to their press release.
The Company says that although it has taken effective measures over the last few years to strengthen its digital enterprise, with a substantial increase in digital revenue, this transformation was impeded by a sharp decline in their most significant revenue source—print advertising.
“Legacy costs incurred when Journal Register Company’s total revenues were nearly twice the size it is today,” said Paten in the company’s press release. Their current filing includes assets of more than $100 million and the company now owes $162.3 million in debts.
With the print media decline came more debt and the company was unable to satisfy their 2009 bankruptcy repayment plan. But a second filing is a second chance to alleviate heavy financial burdens and perhaps allow the company to further their digital endeavors in an effort to replace a once-thriving print media business model.
Click here to learn more about Chapter 11 bankruptcy filings.