By The Wall Street Journal
Freedom Communications Inc., the owner of the Orange County Register, is expected to declare bankruptcy this week, according to people familiar with the situation, the latest in a string of Chapter 11 filings in the battered newspaper business.
The company, majority owned for more than 70 years by the Hoiles family, has reached agreements with its lenders to restructure its debts, according to these people.
With annual revenue of about $700 million, Freedom owns the Register and more than 30 other daily papers and eight TV stations. Earnings before interest, taxes, depreciation and amortization -- a popular measurement for leveraged companies -- have declined about 75% over the past five years to about $50 million.
Freedom was founded in the 1930s by R. C. Hoiles, a former printer's apprentice who used his publications in part to spread his libertarian views. The Orange County Register continues the libertarian approach but, like other newspapers across the country, has had to confront the question of its survival.
"We are continuing to work with our lenders to address our balance sheet," said a Freedom spokesman.
Freedom's lenders, which hold roughly $770 million in debt, are expected to take control of the company as it operates under bankruptcy protection. They include J.P. Morgan Chase & Co., SunTrust Banks and Union Bank of California.
The filing is a blow to private-equity firms Blackstone Group and Providence Equity Partners, which acquired a 40% equity stake in the company in 2004 for about $460 million. The deal, which used a relatively small amount of debt compared to later deals in the buyout boom, already has been written down to zero by both firms.
The Hoiles family has been divided for years about what to do with the Irvine, Calif., company. Family members representing about one half of the Hoiles clan sold their stake in the company as part of the recapitalization more than five years ago. The stake of the remaining half likely would be wiped out by a bankruptcy filing.
The 2004 deal with Blackstone and Providence allowed the company to remain under family control. For a while after the recapitalization, Freedom posted steady earnings growth as the housing boom fueled profits. But the housing slump that has eroded advertising at most U.S. newspapers struck early in many of Freedom's markets.
Struggling with its debt, Freedom about a year ago suspended its dividend, which was the primary source of income for members of the family's fourth generation, many of whom don't have jobs.
For the most part, members of the clan who cashed out no longer have contact with relatives who stuck with the company, according to two family members.
"Nobody is going to be destitute," said one family member. But the filing is bound to force some family members to work, said people close to the situation.
