Reading, PA —
MediaNews Group offered the minimum bid to purchase the assets of the bankrupt Reading Eagle Company and plans to shut off radio station WEEU 830 AM when the deal is finalized, according to court documents filed Tuesday.
An asset purchase agreement filed in federal bankruptcy court, which was discussed at a hearing this morning and approved by Judge Richard E. Fehling this afternoon, shows that MediaNews Group will pay $5 million for the assets of the company, which filed for bankruptcy protection in March. The documents say a closing date will be set no earlier than 30 days after the agreement is approved by the court and no later than July 31.
Attorneys for Reading Eagle Company said during Wednesday’s hearing that there were only two options: sell to MediaNews Group or shutter the entire company.
“Everything that’s happening happens in a context,” said lead attorney Robert Lapowsky. “Either we’re going to have a sale, or we’re going to have a liquidation.”
Peter D. Barbey, president and CEO of Reading Eagle Company, said the court’s approval of the sale means Berks County will continue to have a local newspaper.
“Today’s court ruling further guarantees the Reading Eagle Company survives for the good of the community, our employees and journalism in the Berks County region,” he said.
Officials from MediaNews Group, which also operates under the name Digital First Media, could not immediately be reached for comment Wednesday.
But a MediaNews Group spokesperson told The Associated Press the company was “pleased to save the Reading Eagle from liquidation and help ensure the people of Berks County don’t lose access to an important source of local news and information, as has unfortunately happened in too many communities across the country.”
The spokesperson told the AP it will “re-create” the Eagle so the paper “has the appropriate resources” to provide local news coverage. The spokesperson did not say how many of the paper’s workers it plans to lay off or if it will reduce the number of days it publishes a print edition.
MediaNews Group is a Denver, Colorado-based company that owns 97 publications across the country, according to its website. The company owns 14 publications in Pennsylvania, including The Mercury in Pottstown, The Times Herald in Norristown and the Daily Local News in West Chester.
Run by a hedge fund, the company has a reputation of buying struggling newspapers, then slashing costs and staff to maximize profits.
At least five days before the sale closing date, MediaNews Group will notify employees who will be retained and the conditions of their employment, according to court documents. Employees not retained by MediaNews Group will not receive a severance package.
According to the documents, members of four unions that represent 39 employees who work in production and distribution will not likely be among those retained. They state MediaNews Group will not assume the six collective bargaining agreements those unions have with Reading Eagle Company.
Two of the unions, GCIU Local No. 14M and GCIU Local No. 4C, had agreed before Wednesday’s hearing to alter their four agreements, eliminating language that requires a buyer of the company to honor the collective bargaining agreements. The other two unions, Teamsters Local 429 and the Communication Workers of America Local 14827, had their contracts rejected by a bench order.
Attorneys for Reading Eagle Company submitted an updated written order Wednesday afternoon, which Fehling signed.
At Wednesday’s hearing, little was said in objection to the motion to get rid of the two union contracts other than to call the move unfair.
Attorney Jessica R. Brown, representing Teamsters Local 429, claimed union employees were being treated differently than nonunion employees. She said the union employees will all lose their jobs as part of the sale to MediaNews Group, while many nonunion jobs will be saved.
“So you would rather have everyone laid off?” Fehling asked her.
Brown, who was participating over the phone, did not respond.
Lapowski had argued that without rejecting the union contracts, a sale to MediaNews Group would not be possible. And, as he had stated previously, that would mean a liquidation of the company.
Fehling accepted his dire account of the situation.
“I’m not comfortable rejecting a collective bargaining agreement willy nilly,” he said. “But this is an all or nothing proposal.”
The unions aren’t the only piece of the company set to disappear as part of the sale. As of the closing date, the documents say, WEEU will go off the air.
The court documents say Reading Eagle Company will attempt to sell the radio station’s FCC license. If it is purchased, the buyer will be able to use WEEU’s tower, antenna and transmitter for up to five years or until MediaNews Group sells them, whichever comes first.
Reading Eagle Company includes the Reading Eagle, WEEU 830 AM, the weekly South Schuylkill News, Pretzel City Productions and its commercial printing subsidiary REP. The company has a total of 234 employees.
The company filed for bankruptcy protection March 20, citing an untenable financial situation. The company was put up for sale, and MediaNews Group was the only group to submit a qualified bid by the May 15 bid deadline.
At Wednesday’s hearing, Sara April of Dirks, Van Essen, Murray & April, a company hired by Reading Eagle Company to assist in the sale, briefly discussed a second bid that was received.
According to April, the other bid did not yet have adequate financing in place, which made it unqualified. She did not name the other bidder.
April said it was unclear if the second bidder would eventually be able to secure adequate funding, but that it most certainly could not do so before the company ran out of money and was forced to close.