Sandton Capital submits top bid for The Free Lance-Star’s assets
RICHMOND—An affiliate of New York-based investment firm Sandton Capital Partners is in line to become the owner of The Free Lance–Star Publishing Co.
Sandton submitted the highest bid of $30.2 million for all the assets of the Fredericksburg-based media company during an auction held last week at a downtown Richmond hotel, attorneys for the FLS announced during a Thursday morning hearing in front of U.S. Bankruptcy Judge Kevin R. Huennekens.
Sandton principal Robert Orr said the firm plans to finalize the purchase of the FLS’ assets as soon as possible and no later than June 20. Orr said in court that Sandton likes the FLS’ management, product and reputation in the Fredericksburg community.
“We really believe strongly in community newspapers, especially the good ones, and we think this is a good one,” he told The Free Lance–Star management and staff in a meeting late Thursday afternoon.
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 was allowed to submit a credit bid of $13.9 million at the auction. The firm also plans to put up $16.3 million in cash to close the deal. As the primary creditor in the FLS’ Chapter 11 bankruptcy case, Sandton will probably get most of that cash back later.
Publicly traded New Media Investment Group Inc. submitted the next-highest bid of $30 million at the auction and is hence the backup bidder should Sandton fail to close on the purchase.
Sandton has not yet signed off on the asset purchase agreement, but an attorney for the firm, Dion Hayes of McGuireWoods, said he is confident the matter will be resolved. Sandton is also appealing a ruling in the case that limited the amount it could credit bid.
“As a result, there’s not a lot we can say substantively today,” Orr told Free Lance–Star employees during Thursday afternoon’s meeting, which took place at the media company’s office at 616 Amelia St.
He did, however, commend Publisher Nick Cadwallender and Associate Publisher and part-owner Florence Rowe Barnick, who received a round of applause from the staff.
“It’s imperative that we have business now as usual,” Cadwallender said. “I know I can count on you.”
Eleven interested parties submitted bids for the company, and nine participated in last week’s auction, FLS attorney Lynn Tavenner said Thursday.
The firms that participated, Tavenner said, were New Media Investment Group Inc., DSP Acquisitions LLC (Sandton), Halifax Media Holdings LLC, Ogden Newspaper of Virginia LLC, BH Media Group Holdings Inc. (Berkshire Hathaway), Monticello Media, Unison Site Management LLC, L&L Broadcasting and Colgate Enterprises LLC.
Colgate and Berkshire submitted the highest separate bids for the FLS’ radio and newspaper assets, respectively, but New Media and Sandton both put in bids for all the assets that exceeded the sum of the parts.
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.
The FLS has been operating normally as a debtor-in-possession inside bankruptcy protection since its Jan. 23 filing. The sale will end the Rowe family’s 130-year ownership of the local media company.
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.
The FLS took many steps to try to restructure the business to become compliant with the loan covenants. That included reducing the number of full- and part-time employees from about 454 in 2007 to 303 at the end of 2013.
Employee benefits have also been reduced, and hours have been cut.
The FLS also tried to refinance its debt by approaching banks and private-equity lenders, but was unable to find a loan or buyer that would have allowed the company to get out from under its debt burden.
Business editor Cathy Jett also contributed to this article.
Bill Freehling: 540/374-5405