NEW YORK — After a federal judge announced he was delaying a decision on the New Haven Register parent company’s bankruptcy, the chain’s interim CEO made an announcement of his own to a reporter: The layoffs are over.
The action took place Thursday in federal bankruptcy court in Manhattan, where the Journal Register Co. has filed a motion to emerge from bankruptcy.
After a day’s worth of motions from such diverse groups as the State of
Connecticut and a Midwest pension fund, as well as former stockholders, Judge Allan G. Gropper said he would decide by next week about JRC’s confirmation petition. (Gropper is pictured leaving bankruptcy court after the hearing Thursday.)
JRC, a Yardley, Pa., chain, owns the New Haven Register and 19 other daily newspapers and some 180 weeklies. (The Reg is the flagship.) The company filed for protection from creditors on Feb. 21. The prepackaged bankruptcy would leave a network of banks with 90 percent of the new company’s stock and the management with 10 percent. It also includes nearly $2 million to certain managers in exchange for duties such as “shutdown bonuses” — i.e. firing scores of employees.
Objections to JRC’s bankruptcy plan have been filed by Connecticut Attorney General Richard Blumenthal’s office, the Central States Pension Fund and major stockholder Richard Freeman of Scranton, Pa., who said in an interview last week that he would lose all of his 10 percent stake in JRC unless the judge intervenes.
Blumenthal’s office filed an objection to the company’s plan to pay nearly $2 million to more than two dozen executives for work including the shutdown bonuses (described here). That part of the plan had also drawn objections from the U.S. Bankruptcy Trustee, a government agency tasked with making sure bankruptcies met legal guidelines.
Connecticut Assistant Attorney General Denise Mondell, who argued the state’s position Thursday, refused comment. Attorney General Richard Blumenthal later reiterated that JRC did not prove the bonuses were necessary.
“We were pleased that lthe judge gave us a full and fair opportunity to present our argument. There is no way to predict the outcome, but we believe strongly that they {the bonuses} should be banned,” he said.
Shaunna D. Jones, the lawyer for Willkie Farr & Gallagher, who argued the case for JRC, said the judge did a good job hearing the case, although it took a lot longer than she had anticipated.
“There were a lot of complex legal issues,” she said. Before the hearing, she predicted a decision after at most a 90-minute session. The hearing lasted more than double that time.
The sixth-floor courtroom, with government-white walls and a four-foot diameter disc announcing that this was the Bankruptcy Court of the Southern District of New York centered on wood paneling behind the judge’s bench, was divided into two camps.
On one side, facing the raised bench, were nine lawyers, most from Willkie Farr. They argued for the bankruptcy confirmation. On the other was a coalition of a half dozen lawyers with objections to one or another part of the plan.
The most vociferous objector was Philip P. Kalodner, a Gladwyne, Pa., lawyer representing himself, who said he was against the plan because the numbers just don’t add up.
Kalodner cross-examined JRC interim boss Robert Conway for nearly a half hour on the company’s financial statements and projections. Conway, a tall, lean, distinguished-looking man who spoke in a quiet, gravelly voice, patiently answered the questions, his voice sometimes trailing off.
Kalodner asked Conway why his projected expenses going forward were less than they had been. The price of newsprint has come down “dramatically,” the JRC executive explained. The recession that took hold late last year had hurt JRC’s bottom line, which is one reason why revenue projections were off as much as nearly 14 percent in the first quarter of 2009.
Finally, after Kalodner had cross examined other witnesses and made a rambling closing statement, the judge asked him if he just wanted the bankruptcy plan junked and all parties to start from scratch with Kalodner giving them guidance. A little sheepishly, Kalodner said no.
As the hearing. which began a half hour after its 11 a.m. scheduled time, ground into its second hour, the judge asked litigants if they wanted to break for lunch. They said no. The judge said that might be a good thing because it might speed things up.
It didn’t turn out that way, which may have accounted for some of the impatience on the part of all in the courtroom.
CEO: Full Steam Ahead
Conway, interim chief executive officer and chief restructuring officer for JRC, said that after the bankruptcy is confirmed, the company would go on as it has.
“There is a strong management team in place in New Haven,” he said. There will be no further layoffs at the Sargent Drive facility in the foreseeable future, he said in a conversation in the courtroom after the hearing.
As to the judge’s ruling, he said he is “cautiously optimistic” that Gropper will rule that the company can emerge from bankruptcy on the terms contained in its modified disclosure statement.
JRC lawyers told the judge they were hoping for a mid-July closing date on more than $225 million in financing. There also would be more than $6.5 million for unsecured trade creditors, which Conway said would help guarantee that the company can buy goods and services such as newsprint and ink.
Shareholder Freeman, seen here taking a call outside the courthouse, argued that it is unfair to separate one class of unsecured creditors, the so-called trade creditors who supplied the goods and services, from others such as stockholders.
The judge said he will try to issue a ruling in a few days, perhaps by the middle of next week.
Jack Kramer, editor of the New Haven Register, declined to comment on the hearing or the declaration that there would be no further layoffs in the foreseeable future.