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Brown Publishing, creditors clash over sale plans

Creditors only want to block sale to secure more funds, says publisher of several local newspapers.

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By Ben Sutherly, Staff Writer Updated 10:40 PM Saturday, June 26, 2010

Assets of the financially troubled Brown Publishing Co. could be put up for auction in July in the U.S. Bankruptcy Court’s eastern district of New York.

A deadline for bidding hadn’t been posted on the court’s website at 6 p.m. Friday, June 25, but Brown attorney Edward M. Fox on Friday said he expects the deadline to be in July.

Brown Media Corp. — a new corporation made up of three Brown executives, including Roy Brown, its president/CEO — has said it will bid $15.3 million for the Cincinnati-based company’s assets in Ohio, New York, Texas, South Carolina, Illinois, Iowa, Colorado, Utah, Arizona and Wyoming. An auction will be held if more than one bid is received.

PNC Bank, Brown’s largest secured creditor, has approved a credit bid of at least $20 million and doesn’t want the court to approve a sale for less than that.

Brown, which filed for Chapter 11 protection on April 30, publishes several daily and weekly newspapers in the Miami Valley.

The potential sale of Brown’s assets to a company comprised of three of its executives drew the ire of a committee of Brown’s unsecured creditors.

“The only beneficiaries of the proposed sale are the insiders of the debtors, if they are the successful purchasers, and the senior lenders of the debtors, who will receive all of the net proceeds, possibly leaving the estates administratively insolvent, and nothing for general unsecured creditors,” the creditors’ representatives wrote in a June 11 court filing.

Attorneys for Brown Publishing and its subsidiaries, in a filing Monday, called the committee’s argument “a blatant effort to hold the sale process hostage to gain leverage to try to obtain a recovery for unsecured creditors who are far out of the money.”

Brown noted its assets are encumbered by more than $70 million of first-lien debt and $25 million more in second-lien debt. As a result, “there will be no proceeds left from a sale of the debtors’ assets for any creditors other than the first-lien lenders, who are deeply undersecured.”

In a June 21 filing, Brown also said it was “not likely to survive” beyond the week of July 5 if the unsecured creditors committee’s efforts to delay the sale process were successful and Brown did not receive debtor-in-possession financing. The court has since approved that financing, Fox said.

Bids are to be submitted in writing to K&L Gates LLP, 599 Lexington Ave., New York, NY 10022. The court will let Brown cancel the auction if it believes that’s in the best interest of its estates and creditors.

Brown has 811 employees. Its Ohio newspapers include the Beavercreek News-Current; Centerville-Bellbrook Times; Eaton Register-Herald; Englewood Independent; Fairborn Daily Herald; Greenville Daily Advocate; Huber Heights Courier; Kettering-Oakwood Times; Piqua Daily Call; Sidney Daily News; Springboro Sun; Troy Daily News; Urbana Daily Citizen; Wilmington News-Journal; Wright-Patterson Air Force Base Skywrighter; and Xenia Daily Gazette.

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