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Judge approves FLS settlement

Judge Kevin R. Huennekens approved a settlement Thursday on a number of disputes that he said “is in the best interest to expedite the conclusion” of The Free Lance–Star bankruptcy case.

The settlement between Sandton Capital Partners, the Pension Benefit Guaranty Corp. and the unsecured creditors committee resolves how to distribute proceeds from the recent sale of the newspaper.

It resolves all the claims, including the two largest: one for more than $37 million owed to Sandton and a $21 million claim with the PBGC.

Sandton purchased a loan from BB&T that had been made to the FLS in 2007 to build Print Innovators, a state-of-the-art commercial printing plant on Belman Road in Fredericksburg last summer. Sandton then advised the FLS to file for bankruptcy and purchased the company at a bankruptcy auction May 15 for $30.2 million.

The PBGC was the largest unsecured creditor in the case. Its outstanding balance represented the under-funded portion of the company’s pension plan.

The settlement in U.S. Bankruptcy Court of the Eastern District of Virginia, Richmond Division, also directs the proceeds of the recent sale of a William Street property owned by the newspaper to Sandton.

Sandton agreed to cease any adversary proceedings, including one petition filed to disband the committee of unsecured lenders.

The settlement also requires the debtor to file by Aug. 6 a plan to close out the bankruptcy.

Lynn Tavenner, an attorney for the debtors, said the settlement “is fair and in the best interest [of the debtor and creditors].”

The FLS filed for Chapter 11 bankruptcy in January. After submitting the winning bid at the auction, Sandton closed on the purchase June 19 and has been operating The Free Lance–Star, its website, radio stations and commercial printing operation since.

The next hearing in the case is set for Aug. 26.

Lindley Estes: 540/735-1976