the town dandy / By Hank Sims

Points de suspension

(Jan. 21, 2010) Dapper Dean. Hey, a bankrupt Texan! What a twist, though! If you were giving odds 10 years ago, who would you have expected to end up still in control of his insanely over-leveraged megalithic megacorp … Maxxam/Pacific Lumber’s Charles Hurwitz, High Lord of the Financial Dark Arts, or boy-faced newspaperman Dean Singleton?

Well, you got it wrong. Hurwitz flamed out badly two years ago, when his particular house of cards went a-tumble. He overplayed his hand, then he misplayed it, and when it was over his Humboldt County crown jewel was in the hands of some San Francisco hippies. Not so Dean! When his vehicle — MediaNews, the parent of the local Times-Standard — flamed out last week, Dean went to the bankruptcy court with everything tied up in a neat little package that will leave him in full control.

The stories are similar, yet different. Like Hurwitz, Dean built his empire by mortgaging absolutely everything up to the hilt and using this unleashed capital to acquire more … and then mortgaging that up to the hilt. For some reason, everyone went along … the lenders kept lending … until the accumulated debt reached nearly $1 billion (in Dean’s case) and the newspaper industry went kaput (also in his case). At that point, it would seem, the one-time owners of that $1 billion took notice. MediaNews’ credit rating was dropped to sub-junk.

But while everyone wants 200,000 acres of prime Humboldt County timber land, no one in their right mind would want Dean’s kajillion crappy newspapers … not in this day and age, anyway. So — and this is my analysis only, probably bearing no relationship to actual facts — what do you do if you’re Dean? What do you do if you’ve loaned Dean $1 billion? At this point, probably the best option on both sides is to do what Dean and his hapless lenders did, in fact, do.

The deal that they’ll be taking to the judge is this: The former owners of the $1 billion will kiss most of that money goodbye … because it was gone anyway, and a sale of the assets would bring maybe only a quarter of it back. Instead, the collective used-to-be-billionaires will take a majority stake in Dean’s crappy newspaper company — which, with no debt on the books, suddenly makes it somewhat less crappy (from a financial perspective, rather than a journalistic one). At the same time, though, none of these people want to run newspapers, so they leave Dean in control of a majority of the “preferred” stock, meaning that he can still call the shots. And then the creditors will hope against hope that somehow, thus enthroned, Dean will use his proven financial skillz to lure back to MediaNews the money that he once lured from them.

In other words … this changes little on the ground.

1 2 3 NEXT PAGE >SHARE