Bankruptcy court judge opens door for creditors to submit reorganization plan but doubts they can save the wire service
United Press International said it is losing $150,000 a month and has only enough cash to last a month or so.
At a hearing March 4 in federal bankruptcy court in New York, U.S. Bankruptcy Judge Francis G. Conrad rejected arguments by UPI management and opened the door for creditors to submit plans to reorganize the company.
However, because of the news agency's desperate financial condition, Conrad said he doubted whether even the creditors will be able to save UPI.
The ruling means UPI is for sale again. Only now potential buyers do not have to deal with UPI managers, as had been the case since UPI filed for bankruptcy last August. Anybody can offer to buy the agency, but any offer would need approval of the creditors.
Dennis M. O'Dea, an attorney for creditors who are owed $60 million, said the creditors committee will entertain all offers to buy the 83-year-old news service.
It is clear that if no buyer steps forward, UPI will be liquidated.
O'Dea gave no time frame when asked by reporters after the hearing.
He said UPI was paying for operating losses out of $1 million cash it had on hand when it filed for bankruptcy--and that was running out.
He said a number of possible buyers had expressed interest and he expressed optimism that a buyer would come forward. It is a rare opportunity to buy an international news agency with the reputation and tradition of UPI, he said.
The price? O'Dea said the committee was seeking $5 million to $15 million. UPI attorney Remy Ferrario said the company was worth at least $5 million.
The creditors include American Telephone & Telegraph Co., Harris Corp., and the Wire Service Guild. The Guild represents most of UPI's 400 to 500 employees.
Conrad's decision was a blow to UPI management, which has failed to find a buyer or to file a reorganization plan in the seven months UPI has been in bankruptcy.
UPI attorney Ferrario argued that allowing creditors into the restructuring process would "impede" efforts to attract investors and reduce UPI's value. He said the company expected to break even on operations by the end of the year and asked that management continue for 30 days as the only group able to propose a reorganization plan.
O'Dea argued that the company was continuing to lose money and was seeking another $3 million in credit that would further erode the creditors' position. He warned that unless the creditors were allowed into the reorganization process the company would collapse and have to be liquidated.
Conrad said it would be "an injustice to the banking system" to leave UPI management in sole control of its future because the creditors are "the true owners of the company." He feared continuing operating losses would jeopardize their interests.
"The hard, cold facts say to me there's a real possibility you won't be in business at the end of April," Conrad told UPI attorney Ferrario.
In papers filed before the hearing, attorneys for the creditors told the court that, when it comes to a reorganization plan, UPI managers should lead, follow, or get out of the way.
The creditors committee asked the court either to allow the committee to file a reorganization plan, to appoint a trustee to manage UPI, or to liquidate the service while something was still left.
"While the past two-and-a-half months have brought little progress toward a plan of reorganization, they have seen a steady deterioration of UPI's financial position," the committee said in opposing management's motion to extend the exclusivity period for filing a reorganization plan.
UPI was seeking a second extension of the period during which it has the exclusive prerogative to file a reorganization plan (E&P, Feb. …