Feb. 28--Creditors in The Free Lance-Star Publishing Co.'s Chapter 11 bankruptcy case will meet this morning in Richmond federal court.
The FLS, which filed for bankruptcy Jan. 23, has two primary creditors--New York City-based Sandton Capital Partners and the Pension Benefit Guaranty Corp.--as well as a number of much smaller ones.
Sandton owns a loan made to the FLS in 2007 that now has an outstanding balance of about $38 million. The FLS used the loan to build Print Innovators, a state-of-the-art commercial printing plant on Belman Road in Fredericksburg.
The largest unsecured creditor is the PBGC, a federal agency that may end up taking over the company's pension plan. The plan is currently underfunded by about $5.3 million, according to the bankruptcy petition. Assuming the PBGC does take over the pension plan, just about all FLS employees would continue to receive their full expected benefits.
There was a brief hearing in the bankruptcy case Thursday. Another hearing is scheduled this coming Thursday at which the procedure for the bidding process of the FLS' assets will be discussed. Another hearing is scheduled for March 24.
The FLS never missed a loan payment to original lender BB&T, but fell out of compliance with the terms of the loan agreement due to an insufficient ratio between its debt and earnings. The FLS attempted to refinance and find a buyer, but was unable to do so, leading to the bankruptcy case after BB&T sold the loan to Sandton.
The FLS is now operating as normal inside bankruptcy protection. The company brought in about $35 million in revenue in 2013, according to court documents, down slightly from 2012.
The company's earnings have not yet been publicly reported. FLS Publisher Nick Cadwallender said in court last month that the company's EBITDA--earnings before interest, taxes, depreciation and amortization--was healthier in 2013 than 2012 because of lower expenses. The FLS' workforce has shrunk by about a third in the past several years, and the company has remained profitable despite the loan.
Sandton attorney Jason Teele said in court last month that the FLS would owe the firm $260,000 a month outside bankruptcy. That is more than likely the required debt service on the loan and computes to $3.12 million a year.
Bill Freehling: 540/374-5405
(c)2014 The Free Lance-Star (Fredericksburg, Va.)
Visit The Free Lance-Star (Fredericksburg, Va.) at www.fredericksburg.com/flshome
Distributed by MCT Information Services