Auction of Free Lance–Star assets begins today
The future of The Free Lance–Star Publishing Co. could be determined today in Richmond, though the outcome may not be publicly known for another week.
The company’s assets will be auctioned off today in Richmond. The venue has not been announced, and it will be closed to all but a small group, including attorneys, company principals and prospective bidders.
The results are expected to be made public at a May 22 sale hearing in front of U.S. Bankruptcy Judge Kevin R. Huennekens in Richmond.
It has not been announced what companies submitted bids for the FLS’ assets by this past Friday’s deadline.
The FLS’ assets include the newspaper, fredericksburg.com, freelancestar.com, WFLS, WVBX, WWUZ, WNTX, Print Innovators, several real estate properties in the city and other digital products. Potential buyers will be able to bid on the radio assets separately from the remainder.
One likely bidder is Sandton Capital Partners, the primary creditor in the FLS’ Chapter 11 bankruptcy case.
Huennekens previously ruled that Sandton can submit a credit bid of up to $13.9 million on the FLS’ assets.
Credit bids are frequently used in bankruptcy court. They typically allow secured lenders to bid the amount they are owed without putting up additional cash.
Sandton purchased a loan from BB&T last summer that had been made to the FLS in 2007 to build Print Innovators, a commercial printing plant on Belman Road in Fredericksburg. The outstanding balance is about $38 million.
Sandton attorneys have argued that the New York-based investment firm should be able to submit a credit bid equal to the full balance of the outstanding loan. Huennekens capped the bid after citing a desire for a robust auction, disputed liens and Sandton’s “inequitable conduct” since taking over the FLS’ loan.
Huennekens restricted Sandton’s credit bid to $1.2 million on the radio assets and $12.7 million on the remainder. Sandton is appealing the ruling, but the final determination won’t be made until after the auction.
The credit bid that the firm will be able to place on the radio assets was limited in part due to a ruling in the case that Sandton doesn’t have a lien on the FLS’ three radio towers or Federal Communications Commission licenses.
Sandton can still bid more than the $13.9 million, but it would have to put up additional cash for any amount beyond the credit-bid cap. The firm, which has not disclosed what it paid for the loan, could also get a significant portion of the proceeds from any bid that comes in higher than the cap.
The assets are expected to be sold officially by June 20, followed by a second closing to sort out FCC issues.
The FLS’ next-largest creditor after Sandton is the Pension Benefit Guaranty Corp., due to an underfunded pension obligation of about $5 million. If the federal PBGC takes over the fund after the assets are sold, all but a few current and past FLS employees would receive their full pension benefits. The new FLS owner wouldn’t inherit the plan.
The FLS also has some much smaller creditors.
The FLS has been operating normally as a debtor-in-possession inside bankruptcy protection since its Jan. 23 filing.
The company, which remains profitable, never missed a loan payment to BB&T, but fell out of compliance with an agreement governing the ratio between earnings and debt. The FLS tried to refinance the loan and sell the company, but it wasn’t able to command a price acceptable to BB&T.
Bill Freehling: 540/374-5405