ADN sold after no other bidder surfaced
The Alaska Dispatch News will be able to stay in business under the new ownership of the Binkley Co. after a federal bankruptcy judge on Sept. 11 gave the go ahead despite concerns that the sale price of $1 million seemed a giveaway to those owed money from former owner Alice Rogoff.
After hearing arguments lasting most of the day, Judge Gary Spraker of U.S. Bankruptcy Court, Division of Alaska, acknowledged the accelerated pace from filing to sale.
Rogoff filed for Chapter 11 bankruptcy on Aug. 12, contending she suffered a revenue shortage of $125,000 per week and didn’t have cash on hand to pay vital bills such as employee insurance premiums and the newspaper carriers that deliver the paper.
Now, a month later, the $1 million loaned by the Binkley Co., is spent. And by the end of the week, the ADN will have less than $500 in its bank account with payroll of $390,000 due next week, Finance Director Erin Austin told the judge.
Aside from the Binkley Co., made up of siblings Ryan, Wade and James Binkley, and Kai Binkley Sims, and rural Alaska newspaper owner Jason Evans, all the potential buyers rejected purchasing an operation in such a degree of distress.
“It remains abundantly clear the debtor is running out of money and she (Rogoff) is running out of time,” Spraker concluded. “There is no more money, there is no more time, and there are no other buyers… I am persuaded of the benefit to be realized from the sale going forward.”
Binkley Co. President Ryan Binkley told reporters the real work begins now. He said he’s been assessing the number of employees but isn’t ready yet to announce cuts.
“The No. 1 message I would give (to employees) is that they will receive a paycheck next Friday,” Binkley said. “And I would tell them to keep doing a great job every day.”
Binkley declined to say whether the insolvent tangle of financial troubles was due to “mismanagement” on Rogoff’s part. But he said those who did work for Rogoff or sold supplies and were stiffed payment “didn’t get what they deserved, and that’s a shame.”
At the opening of the hearing, Rogoff attorney Cabot Christianson urged Spraker to rule in favor of the sale in the community’s interest to preserve its only daily newspaper and to avoid laying off more than 200 people.
He said he had hoped to hear from interested bidders in open court. But the one other prospective buyer, Steven Malkowich, owner of Alberta Newspaper Group in British Columbia, bowed out Sunday evening. No other potential buyers came forward to challenge the Binkley Co. bid.
At issue was the complaint from attorney Michael Mills that Binkley was “paying an alarmingly low amount for the assets it is purchasing, which includes a sizable ongoing business with revenues of over $20 million a year.”
Miller represents unsecured creditors owed millions by Rogoff that he characterized as “small businesses left holding the bag” such as M&M Wiring Service, which wired the Arctic Boulevard warehouse for the Urbanite Press purchased from a Tennessee company, J. Birket Inc. Both are among 180 individuals and businesses owed more than $2 million by the Dispatch.
Through testimony from ADN finance director Austin, Rogoff and media consultant Bob Kaufman, Christianson sought to show Spraker the Dispatch “had beaten the bushes” trying to locate potential buyers.
Kaufman, working for Rogoff since June, said he rallied five prospective buyers to travel to Alaska. One, Malkowich, told Kaufman that ultimately he wouldn’t be comfortable buying a newspaper in this much financial distress.
Saving it would mean a “kick in the gut to this community because it would take major surgery to keep it going,” Kaufman said, referring to massive cuts in expenses and laying off many of the 212-member staff.
Another representing Wick Communications, a national chain that owns the Frontiersman, the Anchorage Press, and a press that prints several rural Alaska newspapers, told Kaufman he wanted to see the Dispatch succeed. But he “considered it to be extraordinarily risky to buy it.”
Kaufman also went to a national-level media broker who negotiated more than 50 percent of all large media sales in the country in recent years.
“He told me that he could count the number of people with fingers on one hand that would be interested,” Kaufman said.
The biggest problem is that the Dispatch doesn’t have a place of its own to print the paper, Kaufman said. Currently, the giant Goss press is housed at the GCI building on Northway Drive where it was built into the building. Extricating it will take more than $1 million and GCI has made it clear they want the press out of their building.
The Dispatch is cast into free-fall insolvency because “if you can’t get this thing printed at a reasonable price, you will never make money,” Kaufman said.
Binkley Co., attorney Erik LeRoy put Ryan Binkley on the stand to testify that the $1 million price tag is no bargain, but rather a money pit.
“What is it that you call things we discover that you don’t like?” LeRoy prompted Binkley.
“Snakes in the grass,” Binkley responded.
Every day, there’s a new snake in the grass in the form of an unexpected expense or problem that must be resolved in order to continue operations of the now 71-year-old newspaper, Binkley said.
“It’s been an interesting education,” he said.
In addition to the $1 million loan that now transfers to the purchase payment for the Dispatch and certain assets outright, he also is paying Rogoff’s past due Municipality of Anchorage property taxes of more than $56,000. Next week, when Dispatch employees are paid, Binkley Co., immediately assumes that liability and will supply the $390,000 payroll.
The outstanding debts listed in Rogoff’s bankruptcy filings total $15 million. But of that, Rogoff counts herself as owed $12.7 million for personal money she used to keep the Dispatch afloat in 2015 and 2016.
The Dispatch also is carrying $1.3 million in account receivables from companies and individuals who owe the paper money for ads and subscriptions. Mills considers this an asset that should be set aside for paying the unsecured creditors.
But Austin testified that many customers apparently stopped paying their bills during the limbo transition between bankruptcy and the judge’s decision on whether it should be sold to the Binkley Co. or liquidated for cash to pay creditors.
Normally, Austin said, the Dispatch collects $335,000 per week in revenue.
“We haven’t reached that on any of the weeks since the bankruptcy,” she testified.
Since filing bankruptcy, that amount is closer to $250,000 per week, she said.
Christianson was able to convince the judge that even a large amount of owed cash isn’t an asset that can be counted while much, or or all of it, would not be collectible if the company were liquidated rather than sold.
Spraker agreed that the conversation about what is owed for Rogoff’s many debts will need to wait for a hearing on Sept. 22. By then, what assets the Binkley Co., takes and what assets are left on the table for liquidations will be sorted out, he said.
The U.S. Trustee, who has recommended the case be converted to a Chapter 7 liquidation sale to settle some of the unsecured creditors, agreed that the discussion on liquidating assets should wait until Sept. 22. The Trustee, who is charged with overseeing this bankruptcy on behalf of the creditors and general public, did not object to the sale of the Alaska Dispatch News to the Binkley Co.
Naomi Klouda can be reached at Naomi.firstname.lastname@example.org