Post by bob q on Nov 4, 2011 9:10:16 GMT -5
Trouble for newspaper chain tied to The Times Leader
By Michael R. Sisak
A Maine newspaper chain with some of the same backers and leadership as The Times Leader in Wilkes-Barre is in the midst of financial restructuring and has taken steps that indicate it is "at or near collapse," according to a lawsuit filed this week by one of the chain's suppliers.
The lawsuit - filed in a Maine court by the North Carolina-based McGrann Paper Corp. - portrays the MaineToday Media chain as a flailing operation where executives would stockpile tons of paper and then, facing a crippling cash-flow crunch, said they could not pay for it.
The chain, according to the lawsuit, owes McGrann $124,285 for 152 tons of high-quality glossy paper used for printing advertising inserts and special sections. The supplier shipped the paper in eight installments between Aug. 18 and Sept. 26, but the chain never paid any of the accompanying invoices, the lawsuit said.
After the supplier threatened to cut off paper shipments, a MaineToday Media executive pledged he would make full payment on four invoices totaling $65,000, the lawsuit said. The shipments continued, but days later Patrick Sweeney, the chief financial officer of MaineToday Media, said he could not make any payments.
"I am not going to be able to maintain the commitment to pay 3 invoices this week," Sweeney wrote in a Sept. 27 email to a McGrann representative. "I just haven't the cash on hand to manage it."
It remained unclear Thursday whether the same financial constraints and business practices were affecting The Times Leader, where a consulting team was said to have arrived this week to explore potential cost-cutting measures.
Prashant Shitut, appointed as interim chief executive officer of The Times Leader's parent company following the sudden resignation last week of Richard L. Connor, did not return telephone and email messages. Allison Uhrin, the chief financial officer of The Times Leader's parent company, rechristened in June as Impressions Media, also did not return a telephone message.
Susan B. Driscoll, an attorney for McGrann, said she was unaware of whether the company supplied The Times Leader and if that newspaper had incurred unpaid bills.
"I'm only aware of what's in the lawsuit," Driscoll said.
Connor's Oct. 29 resignation fueled intense speculation within The Times Leader about the future of the newspaper, which competes with The Citizens' Voice in one of the few two-newspaper markets in the country.
Connor led the investment group that bought The Times Leader for $65 million in July 2006 from The McClatchy Company. During his tenure, the newspaper has spent lavishly on marketing campaigns, including a party on Public Square in Wilkes-Barre celebrating the newspaper's 100th anniversary.
At the same time, the newspaper has bid aggressively for advertising contracts, vastly undercutting proposals from the competing Citizens' Voice and Standard-Speaker, in Hazleton, winning the right to publish the county's foreclosure sale notices in 2010 for about $255,000 less than it charged the previous year.
Within the last few months, The Times Leader dismissed a photographer, graphic artist and a multimedia editor and hiked health insurance costs for remaining employees - raising the cost of family coverage by more than $150 per month, according to a person familiar with the increases.
The newspaper dismissed at least two more employees, in its circulation department, earlier this week, according to a source with knowledge of the layoffs.
Two weeks ago, Connor announced 38 workers at the Maine chain's flagship, The Portland Press Herald/Maine Sunday Telegram, faced layoffs and another 23 took voluntary buyouts. He blamed a decline in advertising revenue for the cuts, which were mostly in the news department.
"Everyone is more than a bit panicked," one Times Leader employee said following Connor's departure and the news that the newspaper would be bringing in efficiency consultants. "We were told to just go in, do our jobs like we've been doing them and not to worry, but that's completely impossible."
The McGrann lawsuit identified the efficiency consultant as CRG Partners, a firm with offices in Boston, New York and Chicago that describes its role as working "with organizations to address these challenges, resolve complex problems and significantly improve operating performance."
The lawsuit put CRG's role more bluntly, describing it as a firm "that specializes in restructuring companies at or near collapse." As of Oct. 12, the lawsuit said, CRG had assumed responsibility for MaineToday Media for making all financial decisions about paying vendors with past-due invoices.
According to the lawsuit, a CRG representative told McGrann the firm "did not intend" to pay the unpaid invoices and would not return any unused paper stockpiled at MaineToday Media's printing facilities.
A spokeswoman for CRG declined to respond to emailed questions Thursday about the firm's role at The Times Leader and MaineToday Media, saying the firm is "choosing not to comment on this situation specifically."
Sweeney, the chief financial officer for the Maine chain, declined comment when reached by telephone Thursday. An attorney for MaineToday Media did not return a telephone message.
Connor, as he did in Wilkes-Barre, led an investment group in acquiring the Maine newspapers in June 2009, with Dallas, Texas-based HM Capital Partners LLC playing a key financing role in both transactions. Officials from the private equity firm, which invested more than $22 million in the Wilkes-Barre deal, were not available for comment Thursday, according to a woman who answered the phone at the firm's headquarters.
Connor's known investors besides HM Capital included brothers Charles and Hal Flack, the principals of West Wyoming-based Diamond Manufacturing Co.; Frank Henry, the chairman of the Wilkes-Barre-based Martz Group; and Charles Parente, the chief executive officer of Wilkes-Barre based Pagnotti Enterprises, Inc.
Charles Flack, known affectionately by the nickname "Rusty," died in May. Hal Flack, Henry and Parente also did not return repeated calls for comment Wednesday and Thursday.
Connor explained at the time of the Maine acquisition that the chain operated under a separate corporate structure than The Times Leader, but was paying a management fee to The Times Leader's parent, then known as Wilkes-Barre Publishing Co.
The fee, Connor said, substantially increased the Wilkes-Barre company's revenue, though he would not disclose figures. "It's a great shot in the arm for us," Connor said at the time.
Daniel Haggerty, then publisher of The Citizens' Voice and Standard-Speaker, questioned the viability of the arrangement when told of it shortly after the purchase: "I must say, that's a pretty creative way to increase revenues in Wilkes-Barre, while increasing expenses in Maine."