Freedom Communications creditors object to company cash collateral use

By Mark Reccek

Bethlehem, Pa., Nov. 12 – Freedom Communications, Inc.'s creditors Tribune Publishing Co. and Los Angeles Times Communications LLC objected to the company's use of cash collateral to fund operations while in bankruptcy, according to a Nov. 10 filing with the U.S. Bankruptcy Court for the Central District of California.

The creditors specifically contend the stipulation that binds the estate to the will of the pre-petition loan parties.

"The stipulation should not receive elevated protections merely because it was removed from the interim order," the objection said. "Not only should the stipulation not be binding on the debtors’ estates, and thereby the creditors committee, until the expiration of the challenge period; the stipulation should not be binding on the debtors until the entry of the final order."

Additionally, the creditors assert the stipulation restricts the debtors' ability to maximize the value of the estates.

"Entry into the stipulation is not the exercise of the debtors’ sound business judgment," the objection added. "Instead, debtors’ entry into the stipulation reflects an abdication of their fiduciary duties to seek the most advantageous financing available to their estates and to maximize the value of their estates for the benefit of their creditors."

As previously reported, the company received interim approval to use cash collateral on Nov. 5. The cash collateral use is scheduled to expire on Dec. 14; the final hearing is also scheduled for that date.

Freedom also received a commitment for debtor-in-possession financing from Silver Point Finance, LLC.

The DIP facility is comprised of $3 million of new funding and a $19.46 million pre-bankruptcy debt refinancing amount.

Interest on the DIP financing will be 12%, and the facility will mature in 12 months with an option for a six-month extension if the company’s EBITDA is at least $2 million and a contract is in place to sell its Santa Ana real estate.

Freedom Communications, a Santa Ana, Calif.-based newspaper company, filed for bankruptcy on Nov. 1. The Chapter 11 case number is 15-15311.

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