The unsecured creditors of Freedom Communications Inc., the Irvine based company are planning to fight against the bankruptcy reorganization of the company. It is also said that they might be submitting their own competing plan.

The court-appointed committee of unsecured creditors has asked the judge handling Freedom’s bankruptcy case to issue orders for the company to handover its confidential financial details. The creditors will draft an alternative plan based on the reports.

Freedom is the parent company of the Orange County Register. It filed for bankruptcy in the month of September, 2009. The company has plans to turn over about 90% of its share to New York based JP Morgan Chase & Co. & 26 other secured creditors.

Raymond Cyrus Hoiles, family founder of the company and two other private equity investors will be seeing their stakes slashed to a combined 2% & will have an option to buy back 10% of the company. The step is going to cut Freedom’s debt from about $1 billion to $325 million.

The company came into debt in the year 2004 during the buyout by two private equity firms Providence Equity Partners LLC and Blackstone Group LP. The two of them kept the family members of Freedom in control.

In most of the cases it is seen that the unsecured creditors and shareholders end up getting the shorter end of the stick during the reorganization fights in a bankruptcy court.

As mentioned in the plan, the unsecured creditors will claim an amount of $300 million out of which, $5 million will be split between the shareholders & former employees. If unsecured creditors will vote against the plan, they will not get anything.

Alan Bell, former Freedom Chief Executive and a committee member said, “It is immoral and wicked that we will not get consideration of more than $5 million. The bankruptcy code gives exclusive right to the company to propose a reorganization plan but the creditors have the right to ask the court to terminate it”.

The creditors committee has requested the court to hear the request on Monday.

This entry was posted on Thursday, November 12th, 2009 at 3:06 pm and is filed under Venture Capital News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.