Screen shot 2009-09-02 at 8.43.37 AMIt’s for reorganization, not closure, and wasn’t unexpected.
Freedom Communications is based in Irvine, in Orange County, and privately held. It has about 30 newspapers and eight TV stations. Says the company:

“This announcement is positive news for the Company and all of our associates, who have been making extraordinary efforts to transform our business, as well as for our customers and the communities that depend on us for critical information,” said Freedom CEO Burl Osborne. “Reaching this agreement with our lenders provides us with an orderly process to re-align our balance sheet with the realities of today`s media environment.”

According to a detailed story in the O.C. Register, the company’s flagship paper, the deal wipes out almost a half-billion in debt. It also effectively takes control of Freedom out of the hands of its longtime owners, the Hoiles family.

The bad news is that there’s still more than $300M in debt. But the company says the Register and the company as a whole are profitable.

Big losers seem to be the company’s newspaper carriers:

There was one immediate advantage to the bankruptcy. By filing when it did, Freedom stopped payment on a $28.9 million class action settlement with the Register’s carriers. The company had agreed in January to pay back wages to the 5,000 carriers as well as legal fees in a dispute over whether they were properly classified as independent contractors.

Emphasis added. Note that the “advantage” come from screwing over a bunch of people, most of them probably immigrants, who had to get up at 3 a.m. to deliver the company’s papers at what was probably a lot less than minimum wage. The company got sued, figured it was going to lose—and settled. Now it might be able to reneg on the deal. Nice.

Winners? Dissident family members who forced the company to buy them out. The buyout created the debt which, seven years later, forced the company into bankruptcy.

We go into such detail to note that, while the climate for newspapers is obviously very difficult right now, in almost all the cases we’ve seen thus far of newspaper organizations going into bankruptcy, the companies brought their problems on themselves—and have displayed some thuggish behavior in the process.