Bankruptcy court approves $1 million loan to keep ADN going
Alaska Dispatch News will be able to pay its most immediate bills — health insurance and employee paychecks — after a federal bankruptcy judge gave approval for a $1 million debtor’s loan to owner Alice Rogoff at an Aug. 21 hearing.
Other bills among the $2.5 million owed to unsecured creditors will have to wait until later in the process, said Judge Gary Spraker as he ruled in favor of three motions filed by Rogoff’s attorney. His rulings allow Rogoff to take the $1 million and spread it out over the next several weeks paying debts that include past-due rent payments.
“There is a whole host of unanswered questions here,” Spraker acknowledged in the ruling. “Parties remain able to compromise on amounts (owed) to the extent that you can do that.”
Whether the judge will approve the actual sale of the newspaper to the Binkley Co., will have to wait until a Sept. 11 court hearing at U.S. Federal Bankruptcy Court, Alaska Division.
The deal worked out between Rogoff and the Binkley Co. was initially not acceptable to several creditors who objected that they needed to protect their own interests in eventually getting paid.
GCI and Arctic Partners, who are the landlords for two buildings housing ADN printing presses, the Municipality of Anchorage, lien-holder M&M Wiring and Birket Inc., all removed their objections once they received assurances that their interests were to be protected.
Rogoff struggled to fund daily operations while encountering financial distress over the past year related to a number of factors. In filing for bankruptcy on Aug. 12, she laid open company books showing her budgetary plight. Now she must obtain bankruptcy court approval before any final sale of the Dispatch, and for any bills to be paid.
Concurrent to the bankruptcy ruling, an eviction notice brought by GCI in Alaska Superior Court on Aug. 11 also is being worked out.
A day prior to Rogoff’s bankruptcy filing, GCI sought to evict the Alaska Dispatch from the Northway Drive building, claiming $1.4 million in unpaid rent and utility bills.
Now GCI has been working with ADN and the Binkleys to reach an agreement, which would allow the proposed financing and sale to proceed and keep the paper in production.
“We received a commitment from Ms. Rogoff,” said GCI spokesperson Heather Handyside. “We (had been) waiting for Ms. Rogoff’s commitment to guarantee payment of the costs of removing ADN’s press from GCI’s building. With her commitment, the Binkley financing can go forward. This isn’t a new term—Ms. Rogoff committed to pay the costs of removing ADN’s press in the 2014 lease of the Northway Drive facility.”
Rogoff filed a motion for expedited approval of the commitment with GCI on Aug. 22. The stipulation agreement on Aug. 22 states that Rogoff will pay GCI $101,500 for rent and utilities for use of the property from Aug. 12 to Sept. 11. Then, an additional $101,500 will be paid on Sept. 11.
“If either of the payments … is not timely paid (time is of the essence), GCI is authorized to pursue all of its remedies in the eviction proceeding,” according to GCI’s agreement with Rogoff filed by her attorney Christianson.
“After Oct. 11, there would be another agreement, pending what happens with the purchase,” Handyside said. “If the purchase is successful, there could be a new lease negotiated for up to 16 months during the transition.”
At the same time, GCI is working on an agreement with the Binkley Co., which could allow them to remain in the premises for up to 16 months.
“However, the deal has not been finalized yet,” Handyside said.
The other two printing presses owned by Rogoff at a warehouse owned by Arctic Partners were a source of contention at the Aug. 21 hearing as attorney Jason Kettrick fought for the right of his client to sell them both if Rogoff doesn’t remove them by Sept. 30.
“The problem is that (the press) is humungous and completely consuming the warehouse’s space,” Ketrick said.
But the U.S. Trustee Kathryn Perkins didn’t want the judge to allow Arctic Partners to do away with the press, either by selling it or scraping it.
“That is collateral that I don’t think we should let out of our reach,” she said.
If value is determined, it could be sold to pay debts, especially if the bankrupcy goes to Chapter 7 liquidation. Perkins is a Justice Department employee who is looking out for the stakeholder interests in this bankruptcy.
Cabot Christianson, Rogoff’s attorney, also didn’t want to discuss the presses at that hearing.
“It falls outside the scope of what we are here to decide today, the motions,” Christianson told the judge.
Spraker agreed, and encouraged Arctic Partners to be patient on the outcome.
Arctic Partners is scheduled to receive payment of $31,589 the first week of September, and another $32,938 payment on Sept. 15, according to the Binkley Co., attorney Erik LeRoy. Rogoff has agreed to be out of the facility by Sept. 30.
Those payments are far less than the estimated $143,000 Arctic Partners says it is owed.
Making sense of the ADN’s struggles
Among those interested in the outcome of the Alaska Dispatch News bankruptcy case were a handful of people attending court proceedings the past weeks who had their own life history tied in with the publication.
One was Patrick Dougherty who worked at the Anchorage Daily News for 34 years, retiring as the editor of the Anchorage Daily News just as the newspaper changed hands. He pinpoints several causes for the paper’s “financial meltdown.”
“The most important,” he said, “is that she overpaid for the paper.”
For example, he said, the much larger Boston Globe and the Worcester Telegram (about the same size as the ADN) together sold for $77 million in 2013-2014. Paying $34 million for ADN was too much, Dougherty contends.
“The other thing is that, as it turns out, Alice Rogoff couldn’t afford it; that’s something I understand now that I know more about her finances,” he said. “Alice didn’t have enough money to do the purchase. She could only swing it by selling the building (for $15 million).”
That set off a chain of unfortunate events. A newspaper separated from its prime real estate — the press and its offices — created a lot of unnecessary expenses. Rogoff had to find new offices for staff, acquire a new building for the press and warehouse and install the press, a complicated and expensive process.
“That set a stage where she could never make it. She had too much debt. She had forced herself into all these new expenses,” Dougherty said.
Rogoff’s claims that Alaska’s economic downturn and newspaper industry trends are the principal causes for the paper’s bankruptcy are wrong, Dougherty said.
“It was the initial circumstance that doomed the thing. And then she mismanaged the hell out of it.”
McClatchy wasn’t trying to sell the two-time Pulitzer Prize-winning paper, he said. A few years before the eventual sale, Rogoff had approached McClatchy about buying the paper or its website, adn.com. McClatchy CEO Gary Pruitt told her McClatchy would not separate the paper and the website, and the price of the two could be $60 million or more.
Rogoff walked away.
In the following years, ADN revenues continued to decline and the paper underwent four separate rounds of layoffs and other expense reductions.
A few years later, when Rogoff approached McClatchy again and offered $34 million, McClatchy had to seriously consider the offer.
“If someone comes to you and offers to pay you so much … more money than (the paper) is worth, (a publicly traded company has) a fiduciary responsibility to sell. In that context, they kind of had to do it,” Dougherty said.
“The paper was profitable. It was making money. It wasn’t broke. It wasn’t on the edge of going out of business, unable to pay insurance premiums. It was a solid business. The problem with the newspaper (was) that it was way less profitable than it had been, but it was still profitable,” Dougherty said.
It had stayed that way by trimming expenses.
“The scary thing was we didn’t know if we had hit bottom or not. Once income and expenses are in line and stabilize, then you can start re-building it,” Dougherty said.
A third issue, he said, was that when she purchased the paper, Rogoff shouldn’t have increased expenses one penny without increasing revenues first. She immediately combined the staffs of the Daily News and Alaska Dispatch — a nearly 50 percent increase in the cost of the newsroom alone.
Rogoff co-owned the Alaska Dispatch website with its editor Tony Hopfinger.
The website, established by Hopfinger and Amanda Coyne in 2008, sold a majority interest to Rogoff. Rogoff bought out Coyne’s 5 percent for $5,000. As she was buying the Daily News, Rogoff agreed to pay Hopfinger $1 million for his 5 percent interest, according to a deal memorialized on a napkin. An ongoing lawsuit between Hopfinger and Rogoff, in which he seeks to collect the final $900,000 she says she doesn’t owe him, is still making its way through the courts.
Other new overhead was incurred in renting offices at 300 West 31st Street for the staff. Like the newsroom, the staff in the publisher’s office alone eventually reached seven, which Dougherty said is more than double what it was under McClatchy.
Paying for a Goss Urbanite press, including transportation from the Midwest and installation, cost a reported $1.8 million, another large expense that wouldn’t have been necessary if the ADN building hadn’t been sold, Dougherty said.
More expenses were piled on: monthly rent for the original press in GCI’s building, $600,000 in modifications to a new building and cost overruns, according to the filings of another landlord, Arctic Partners, this one at 5900 Arctic Boulevard.
“It didn’t make sense to sell the building (at 1001 Northway Drive) to GCI,” Dougherty said, “but that’s the only way she could afford it. The mystery to me is how she could have worked 10 years as the chief financial officer for US News &World report and understand as little about finances as she did.”
Rogoff failed to take advice from experts inside and outside the paper, Dougherty said.
For example, he said, she didn’t rely on the expertise of Ken Carter, her own printing and press manager.
“Instead she put some guy who’d been in charge of remodeling her home in charge of the press (project), which has become a very expensive mess,” he said.
She also reduced revenues by eliminating the online subscription “paywall” immediately upon taking over.
“That was not insignificant subscriber revenue,” Dougherty said.
Newspapers across the country are depending more on consumer revenue —like online subscriptions — in this age of declining ad revenue.
“That’s another example of how poorly decisions were made at the very beginning of her ownership. It laid the foundation for what’s happening now,” he said.
Overall, Doughtery said, he’s most concerned about the people still working at the ADN and for the community.
“The newspaper is perhaps the largest manufacturing business in Anchorage. If it goes out of business and 212 people lose those jobs, that’s a major blow to the Anchorage economy,” he said. “It’s a bad consequence for all those people and it’s bad for the community. In order to have functioning democracy, you have to have a strong journalism component.”
Naomi Klouda can be reached at [email protected]skajournal.com.