WILMINGTON, Del. -- Former owners of the Charleston Daily Mail who agreed to resume its ownership declared bankruptcy the next day.
On Jan. 21, Affiliated Media Inc. of Denver petitioned the U.S. bankruptcy court in Wilmington to approve a reorganization plan.
For the moment, the petition freezes a Jan. 20 settlement of antitrust charges that the U.S. Department of Justice brought against the Charleston Gazette and the Daily Mail.
The settlement calls for the Gazette to surrender ownership of the Daily Mail and return it to Affiliated Media, which sold it in 2004.
On Jan. 26, Affiliated Media asked Chief Bankruptcy Judge Kevin Carey of Wilmington to lift an automatic stay and authorize the settlement.
"The settlement agreement is the product of several months of lengthy negotiations between the Department of Justice, the debtor, and the Gazette Company," wrote Derek Abbott of Wilmington.
"The debtor believes the settlement agreement is essential to providing a seamless and well managed conclusion to the Charleston litigation," he wrote.
Carey set a hearing for Feb. 9.
Owners of Affiliated Media, the nation's second largest newspaper chain, expect to continue normal operations while Carey presides over the reorganization.
In hopes of finding a short cut to a fresh start, they offer a "prepackaged" plan that their biggest creditors have already approved.
The plan would swap equity in the company for $583 million in bank debt.
Subsidiaries of Affiliated Media publish the Denver Post, the San Jose Mercury News, the Detroit News, the St. Paul Pioneer-Press and 50 other daily newspapers.
Subsidiaries own 100 other newspapers, four radio stations and a television station.
The bankruptcy petition noted a risk that competitors might attract employees.
It stated that customers might delay payments, advertisers might advertise elsewhere, and insurance costs might increase.
It stated that parties to the Charleston litigation reached a tentative agreement in October.
"The debtor is currently working with the other parties to implement the proposed settlement," it stated.
Abbott wrote in his motion to lift the automatic stay that the settlement avoids the expense, risk and uncertainty of litigation.
"To continue to litigate would be a costly, cumbersome and highly inefficient process," he wrote.