A new filing in the Alaska Dispatch News bankruptcy case is an Aug. 30 request to liquidate Alice Rogoff’s corporate holdings after the purchase agreement moves forward to save the ailing newspaper from the financial brink.
The motion by the U.S. Trustee is to convert the case to a Chapter 7 bankruptcy, after the sale is approved, expresses concern that the people and businesses owed money won’t receive any compensation, said Attorney Kathryn Perkins, acting for the U.S. Trustee Office.
She makes the case that after the Sept. 11 sale closes, Rogoff “will face no reasonable likelihood of rehabilitation,” or legalese for restoring payments to those owed money.
U.S. Trustees are Justice Department officials who are responsible for overseeing bankruptcy cases and whose mission is to protect all stakeholders including the debtors, creditors and the public.
Chapter 11 is filed in cases when a business intends to reorganize and keep operating as a plan is developed to repay creditors. A Chapter 7 bankruptcy calls for liquidation of assets with the proceeds distributed to creditors.
Under a deal struck between Rogoff and the Binkley Co., Rogoff is selling assets related to operating the ADN for $1 million. Bankruptcy Judge Gary Spraker is expected to approve the asset purchase agreement in a hearing set for Sept. 11.
But Ryan Binkley, his siblings and partner Jason Evans are only buying a portion of the corporation owned by Rogoff, as spelled out in filings so far.
The $1 million purchase price matches the $1 million in loan financing Spraker approved from the Binkley Co. to keep the paper operating until the sale closes. Because the purchase price matches the loan, there will be no proceeds from a sale left to pay more than a hundred unsecured creditors owed millions unless another buyer steps forward.
According to her own financial filings on Aug. 28, Rogoff estimates $11.8 million worth of property assets. Of that, $4.7 million is estimated as the value on equipment that includes printing presses the Binkley Co. has no interest in buying.
This, and other assets that are not part of the sale, are the focus of the latest filings by the U.S. Trustee.
Meanwhile, Rogoff estimates she owes more than $10 million in unsecured claims to an array of businesses from ink and paper suppliers to electrical contractors.
“It is unclear who will take control as debtor-in-possession after the Sale Hearing,” Perkins wrote in her motion to U.S. Federal Bankruptcy Judge Gary Spraker. “The United States Trustee presumes that Binkley’s manager (Gerry Grilly) will not remain in control of the debtor-in-possession after the sale, and it is unclear if Ms. Rogoff will step in to liquidate any remaining assets.”
The best-suited person to liquidate any remaining assets would be a chapter 7 trustee, Perkins argues.
This has the benefit of bringing in another level of oversight. Chapter 7 trustees are private individuals, not government employees, who are appointed by the U.S. Trustee to administer Chapter 7 bankruptcy cases, said Jane Limprecht, the public information officer for the U.S. Trustees.
To support her argument, Perkins lays out the fact that new owners, the Binkley Co., made it clear that they do not want to purchase all the assets of the Dispatch, namely the two printing presses currently housed at the warehouse at 5900 Arctic Blvd.
They also declined to renew the lease on Arctic and declined renewing the $47,000 monthly lease at the current offices on C Street. The purchase asset agreement is meant to leave the Binkley Co., “unencumbered” of Rogoff’s debts, according to filings.
“Rogoff… made it clear that (she) lacks the financial capability to immediately fund any activities beyond the sale hearing,” Perkins wrote. “Thus, absent an increase in the proposed purchase price sufficient to generate a return to the estate, the debtor will lack sufficient capital to fund the removal of any remaining equipment from the leased premises in order to liquidate it for the benefit of creditors.”
This inability to remove the Arctic Boulevard printing presses and other equipment, or in the case of Northway Drive landlord GCI’s inability to access that equipment until after Oct. 11 under the terms of the GCI stipulation, “diminishes the value of that equipment to the estate because inaccessible equipment would be substantially more difficult to market and liquidate for the benefit of creditors,” Perkins argued.
But if a Chapter 7 is granted, the value of the unpurchased assets could at least be potentially preserved, she added.
A Chapter 7 trustee would be able to negotiate with GCI for the removal of all remaining assets for liquidation, she wrote. Also, “as a trained bankruptcy professional, that person would have bankruptcy knowledge to ensure maximum recovery for all creditors involved.”
A hearing is set for Sept. 22 before Judge Spraker to consider Perkins’ motions. Her filings show there’s a legal choice to either convert the case to a Chapter 7 or to outright dismiss the bankruptcy.
But Perkins argues against dismissing outright the Chapter 11.
“If the case were dismissed, it would be unlikely that the creditors would see any recovery,” she wrote.
Naomi Klouda can be reached at email@example.com