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Dan's Papers Publisher Sale to Insiders Approved Over Creditor Objections
The sale of Brown Publishing Co., the owner of Dan’s Papers in New York’s Hamptons, to insiders was approved by a bankruptcy judge who rejected part of the transaction after objections from some creditors.
U.S. Bankruptcy Judge Dorothy Eisenberg ruled today that Brown Media, controlled by the publisher’s three top executives, can acquire most of the company’s assets for $22.4 million. She rejected the sale of three real-estate parcels for a total of $10,000 to the insiders.
“I find that the real property was not adequately advertised, was not adequately valued,” Eisenberg said at the close of a three-hour hearing today in U.S. Bankruptcy Court in Central Islip, New York. “There was no support for such a sale for $10,000.”
Brown Publishing, based in Cincinnati, said after a 20-hour auction last week that the winning bidders were Brown Media and the Delphos Herald, which offered to buy several publications in Ohio for $3.59 million in cash. Besides the cash, the bids require the assumption of liabilities.
Eisenberg today approved the sale of the Ohio publications to Delphos.
The official committee of creditors with unsecured claims opposed the real estate sale, claiming that Brown accepted the $10,000 bid for three parcels even though they might be worth more than $555,000.
Shareholder Windjammer Capital Investors LLC also opposed the sale. The private-equity firm said Thomas Carlson, the independent director appointed by Brown to oversee the sale, favored the insiders.
Real Estate Bids
Most of today’s hearing was cross-examination by Michael Warner, the lawyer for the creditors’ committee, over whether other bids for the real-estate had been sought.
Scott Kane, a lawyer for Windjammer, asked the judge to include language in the sale order insuring that the insiders wouldn’t be “insulated” from claims. Windjammer has sued Brown for breach of contract.
Eisenberg said she would sign the sale order after changes in language were made. She agreed to extend authority to Brown to use cash to run its operations until then. A previous order expires tomorrow.
Advertising Decline
Brown, which hasn’t filed its reorganization plan, sought Chapter 11 protection from creditors in April, citing a decline in advertising revenue. Besides Bridgehampton, New York-based Dan’s Papers and the Ohio newspapers, Brown owns business publications in Utah, South Carolina, Illinois, Iowa and Colorado.
Lenders with secured claims bid for the assets at the auction using what they’re owed rather than cash. The lenders include Allied Irish Banks Plc, PNC Bank NA, Brown Brothers Harriman & Co., Huntington National Bank, Prudential Insurance Co. of America and Wells Fargo Bank NA.
The case is In re Dan’s Paper Inc., 10-73295, U.S. Bankruptcy Court, Eastern District New York (Central Islip).
To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net.
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