CHARLESTON – Charleston Newspapers employees were provided some details of the company’s bankruptcy and pending sale to another newspaper company.
Three meetings for employees took place Feb. 1 to provide information to the 206 employees who received WARN notices earlier in the week when Charleston Newspapers, the parent company of the Charleston Gazette-Mail, announced it was filing for bankruptcy and that Wheeling Newspapers, an offshoot of Ogden Newspapers, currently is the highest bidder for the impending sale.
Wheeling Newspapers, a company created by Ogden Newspapers to purchase the Gazette-Mail, bid $10.911 million, according to an asset purchase and sale agreement filed Jan. 30 in U.S. Bankruptcy Court in Charleston.
On Jan. 29, Charleston Newspapers said it was filing bankruptcy and that the Wheeling company owned by the Nutting family was the highest bidder. Ogden owns dozens of newspapers across the country, including ones in Wheeling, Parkersburg, Elkins and Martinsburg.
On Jan. 31, U.S. Bankruptcy Judge Frank Volk delayed ruling on the motion that would open a 30-day bidding process for the purchase of the paper at a hearing. Volk said all parties involved had not had enough time to review a motion outlining procedures related to submitting bids and the actual sale of the newspaper. Volk scheduled a hearing for Feb. 7 to rule on the motion for the 30-day bidding process. A final hearing is scheduled for March 9.
Here’s what the employees were told during the Feb. 1 meetings, according to current employees who attended them:
* Other than nine “essential employees,” all employees must reapply for their jobs and will be subject to whatever pay scale Ogden decides to use. When the Gazette and Daily Mail were combined in 2015, all employees had to reapply for their jobs then as well.
* All seniority will be gone. Everyone who is rehired starts at zero.
* When the sale is final, Charleston Newspapers dissolves. Ogden’s new company for the paper will be Charleston Newspapers LLC.
* Those who don’t get rehired or don’t reapply for their jobs will be eligible for unemployment compensation because Charleston Newspapers will be dissolved.
One current employee said most people expect many employees, including the essential employees, will be looking for other work as soon as possible.
That employee also said most people in the building believe Ogden is the only company that did due diligence on the purchase. Most believe Ogden’s financial condition is solid, and it is believed Ogden is ready to bid up if another company does make a higher bid.
The bankruptcy court filings show that Charleston Newspapers has more than $31 million in liabilities. The biggest of those is $15.6 million owed to United Bank from a loan it took out in 2006. Charleston Newspapers also owes more than $12 million to the Pension Benefit Guaranty Corporation, a federal agency that guarantees retirement plans. Also, the paper owes $3.8 million to the former owners of the Charleston Daily Mail because of an arbitration award handed down last year.
The court filings show the buyer of Charleston Newspapers will agree to provide non-compete payments to the owners of the Gazette-Mail. That includes $150,000 each to Charleston Newspapers president and CFO Trip Shumate, $150,000 to publisher Susan Chilton Shumate and $50,000 to former publisher and president Betty Chilton. Those three also would be prohibited from competing with the Gazette-Mail for two years after the sale.
The documents also show that Charleston Newspapers brought in $19.5 million in revenue and $1.5 million in earnings in 2017 before interest and taxes.
On Jan. 29, Charleston Newspapers employees were issued WARN notices of potential layoffs. A Worker Adjustment and Retraining Notification Act notice is required when potential layoffs could exceed 50. Charleston Newspapers currently employees a little more than 200 employees.
Wheeling Newspapers could decide to maintain current employees, but it remains unknown and Charleston Newspapers issued the notices under their attorneys’ advice.
Now that Charleston Newspapers has filed Chapter 11, it has started a two-month countdown until new ownership could take over. Also, there is a 30-day window in which other potential buyers could come forward to make offers.
Earlier this month, a federal judge upheld a $3.8 million arbitration ruling against the Charleston Gazette-Mail.
U.S. District Judge Thomas Johnston granted the petitioner’s petition to confirm the arbitrator’s award and denied the respondent’s motion to vacate the arbitrator’s award Jan. 19.
The newspaper filed a motion to vacate the arbitrator’s award Sept. 21 in the U.S. District Court for the Southern District of West Virginia.
MediaNews Group Inc. — the former owner of the Charleston Daily Mail — said it did not consent to the combination of Charleston’s two daily newspapers two years ago and that it is entitled to back-payments, plus payments of an annual management fee until the year 2024.
The company also claims www.dailymail.com was sold without consent.
Edward D. McDevitt, the arbitrator, ruled in MediaNews’ favor.
In the newspaper’s Sept. 21 response, the attorneys claim that the domain name sale and the combination of two newspapers were a financial necessity — that default on its loan with United Bank was at hand and that bankruptcy would have been necessary if two newspapers had continued operating into the next year.
The arbitration order says the Daily Gazette Company and the Daily Gazette Holding Company LLC, the companies that run Charleston Newspapers and the Charleston Gazette-Mail, must pay MediaNews Group Inc. and Charleston Publishing Company, the former owners of the former Charleston Daily Mail, $3,795,000 plus post-judgment interest for three primary claims the former publishers of the Daily Mail had made.
Although the Daily Mail’s and Gazette’s joint business operations were known as Charleston Newspapers, the Daily Gazette Company owned the Gazette and MediaNews owned the Daily Mail.
Both companies had 50 percent stakes in Charleston Newspapers until 2004 when MediaNews sold out to the Daily Gazette Company for a reported $55 million.
The Chilton family has owned a Charleston newspaper since 1907, when the family of Charleston politician, lawyer and business William E. Chilton bought the city’s Daily Gazette and renamed it the Charleston Gazette.
Chilton became publisher of the newspaper in 1917, after he lost his re-election bid to the U.S. Senate.
Chilton’s son, W.E. Chilton II, and grandson, W.E. “Ned” Chilton III, also served as publisher. Ned Chilton ran the paper from 1961 until his death in 1987.
Although the Daily Mail’s and Gazette’s joint business operations were known as “Charleston Newspapers,” the Daily Gazette Company owned the Gazette and MediaNews owned the Daily Mail. Both companies had 50 percent stakes in Charleston Newspapers until 2004 when MediaNews sold out to the Daily Gazette Company for a reported $55 million.
In 2007, the Justice Department filed a suit alleging the Daily Gazette Company “planned to deliberately transform a financially healthy and stable Daily Mail into a failing newspaper and close it.”
Weeks after the merger of the Gazette and Daily Mail into the Gazette-Mail was announced in 2015, West Virginia Attorney General Patrick Morrisey's Consumer Protection Division said it investigating Charleston Newspapers for violations of state antitrust laws.
Months later, Putnam Circuit Judge Philip Stowers threw out Morrisey's attempt to force the newspaper to produce large numbers of documents about the merger.
On Oct. 6, 2015, the previous owner of the Daily Mail, the MediaNews Group, filed suit in the Delaware Court of Chancery against the Gazette's owners, seeking to recover unpaid management fees, future management fees if the Daily Mail had continued publishing and money the Daily Gazette received for the sale of the domain name.
Daily Gazette had this case dismissed based on the joint operating agreement’s arbitration clause, and the matter currently is in arbitration.
Also last year, MediaNews filed another suit against United Bank, saying it wrongfully induced CN to sell the rights to the dailymail.com domain name to the London newspaper. MediaNews seeks $1 million the bank received from that sale. In that complaint, MediaNews says it learned of the United Bank issue during discovery of the lawsuit currently in arbitration.
