As bankruptcy proceedings get underway for the Alaska Dispatch News, potential roadblocks are starting to become clear as the state’s largest newspaper looks to transfer from Alice Rogoff to the Binkley family.
The parties met in U.S. Bankruptcy Court in Anchorage today to begin the bankruptcy proceedings—which includes the transfer of management to the Binkley family in return for a $1 million loan—and to figure out how they will keep delivering papers. The final owner will be determined at the end of the bankruptcy process.
The Alaska Dispatch News racked up at least $2.5 million in debt in the run up to Saturday’s bankruptcy filing. That includes $1.39 million owed to GCI for rent (though ADN claims just $304,000 in its filings), more than $262,000 for past-due health insurance premiums and $491,000 to M&M Wiring Service, just to name a few.
What’s become clear is the deal is being structured so the Binkleys can take on the paper without that debt, and that’s not going over well with the creditors.
The court and Northrim Bank, which still holds more than $10 million in unpaid debt from the consolidation of the Alaska Dispatch and the Anchorage Daily News, signed off on allowing ADN to spend $80,000 out of $215,000 in remaining cash on hand to pay the paper’s delivery drivers, according to an interview KTUU reporter Kyle Hopkins posted with Binkley group attorney Erik LeRoy. The money is separate from the $1 million loan from the Binkleys.
ADN future still very much in limbo tonight as bank, judge Allie allowed the paper to spend $80,000 to pay carriers. Video: Binkley lawyer pic.twitter.com/GF3iOW9tyE
— Kyle Hopkins (@kylehopkinsAK) August 18, 2017
LeRoy said the ADN is “on the bubble” when it comes to daily operations. He said the $1 million loan from the Binkley group will be integral to keeping the paper operating through September, when the group hopes the bankruptcy proceedings can finish and the sale can become final.
“It couldn’t afford to make payroll next week without the money the Binkleys are loaning them,” he said.
The groups are set to be back in court on Friday to discuss approval of the $1 million loan from the Binkley group.
A key issue here is by loaning the $1 million, the bankruptcy agreements allow the Binkley group to jump to the front of the line for reimbursement under the sale. That means they get paid back before groups like GCI, M&M Wiring and even Northrim Bank, putting into question whether those groups will ever get their money back.
M&M Wiring and now the Municipality of Anchorage have both objected to the bankruptcy proceedings moving forward. The ADN owes Anchorage about $56,000 in unpaid taxes.
On Wednesday, U.S. Trustee Gail Geiger raised issues with the agreement’s protection for the Binkley group. She, too, was concerned that the agreement would leave creditors out in the cold on the money they’re owed. Her filing also noted that media reports gave the impression that the Binkley group has already taken over operation of the paper without court approval, a move that could land them increased scrutiny.
Today, LeRoy answered Geiger’s concerns with his own filing, where he argued there are more interests at play than just satisfying the paper’s creditors. That filing also makes clear that the sale is being structured in a way to escape those debts.
“This case is not about allocating proceeds of assets to competing classes of claims,” he wrote. “This case is about whether chapter 11 of bankruptcy code can be used to transfer title to a newspaper’s assets from one owner to another without paying the creditors of the first owner. It is an unfortunate circumstance that the newspaper is bleeding so badly that all assets will be used to pay employers, vendors and lessors and there will likely be no assets for the more than $2 million of pre-petition creditors.
He also laid out in stark terms the expectations and limitations of the Binkley group’s involvement.
“To make this very clear, the Binkley company is not prepared to loan more than $1,000,000 to the debtor and that loan has to be secured by a super priority lien,” he wrote. “That means the sale has to be approved by September 20 because it is in that week that the debtor no longer has the funds to meet its September 23 payroll.”
As for the other concerns laid out by Geiger regarding the management of the paper and the ability of the Binkley company to cease funding the paper’s daily operations during the bankruptcy proceedings, LeRoy wrote the Binkley company is still learning the ADN’s finances.
“Binkley company will continue to negotiate with vendors in the notice period,” he wrote. “But it is still excavating its way through the debtor’s contracts and financials and needs to be able to say at any time, “the numbers just won’t work, and it is time to fold.”