The Bulletin is asking its largest creditor to accept an interest rate that is less than half of what it is entitled to under a reorganization plan that the newspaper filed with a federal bankruptcy court this week.
According to the paper’s 30-plus page reorganization plan, Western Communications would pay off its $18 million loan to Bank of America over 30 years at a rate of 4.5 percent, which is about half of what the bank was getting under a negotiated penalty rate with the newspaper. The 2005 loan that allowed the Bulletin’s parent company to consolidate and refinance its then existing debt is at the heart of Western Communication’s August bankruptcy filing. The move made national waves because of the pointed criticism of Bank of America that was offered by the paper’s Editor In Chief John Costa and Publisher Gordon Black. Both Costa and Black blasted the bank for refusing to work with the paper as it weathered the ongoing economic storm, the effects of which were felt particularly acutely in Central Oregon.
The newspaper has claimed that its revenues had fallen 25 percent since the peak of the building boom in 2007, a boom which, incidentally, was championed by the paper even as the economic storm gathered on the horizon.
The company’s income statement, which was filed with the court this past week, doesn’t stretch back that far. However, it shows that the WesCom’s total revenue dropped from $31.6 million in 2008 to $27.6 million in 2010. The paper is reporting revenue of $18.5 million for the first nine months of this year, putting it on track for an even weaker year in 2011.
The numbers also show marked decrease in the paper’s profitability over the past nine months for which WesCom reports a net operating income (revenue minus operating expenses) of $280,000. By way of contrast, the paper reported a profit of close to $3 million before its loans and depreciation were figured in for 2009.
According to The Bulletin’s own accounting of its situation, the paper’s financial difficulties were exacerbated when it failed to meet financial performance clauses built into its B of A loan. The bank responded by doubling the company’s interest rate from six percent to 12 percent. That rate was negotiated down to 10 percent, however, according to the newspaper, the bank was unwilling to further renegotiate the loan, a move with which WesCom executives took exception.
Neither Black nor WesCom’s lawyer, Albert Kennedy of Portland-based Tonken Torp, returned phone calls this week seeking comment.
Under the federal bankruptcy rules, B of A and other creditor have an opportunity to vote on the Bulletin’s proposed plan. They also have an opportunity to put forth their own plan. If the parties cannot come to an agreement a judge will likely decide the terms of the paper’s restructuring.
A Bank of America spokesperson said this week that the lender was not willing to comment on the plan as filed.
In the meantime, The Bulletin appears to be betting that its creditors share its optimistic view about the future of daily newspapers and the region’s ability to rebound.
“Debtor’s markets have a natural beauty and rich history that will continue to attract investment and population in the year’s ahead. Debtor will be ready when they recover,” the company writes in its Nov. 15 disclosure statement.
It goes on: “With exclusive ownership of the most credible and extensive base of local news, Debtor will continue to dominate these markets, and practice what is best for journalism.”
Break out the champagne.