Mary Junck gets $500,000 bonus

Mar 27, 2012 by

According to a Lee Enterprises filing with the SEC, CEO Mary Junck has received a $500,000 bonus related to Lee’s successful refinancing.  Additionally, Carl Schmidt, vice president, CFO and treasurer, received  a $250,000 bonus.

Junck and Schmidt are the fiscal geniuses who way overpaid in 2005 when Lee paid $1.46 billion for Pulitzer Publishing and the St. Louis Post-Dispatch. Their misjudgment of the industry and its future are what saddled Lee Enterprises with the debt that forced Lee into bankruptcy.  And now after Lee wrongly eliminated promised health insurance to its retirees, forced current employees to take unpaid furloughs, froze pensions, cut pay and laid off hundred of employees across the country — now the fiscal geniuses get $750,000 bonuses.  Outrageous!!!

 

Read what Romenesko said about it:  http://jimromenesko.com/2012/03/28/layoffs-at-lee-papers-as-ceo-gets-500000-bonus/

 

We can only assume that once Junck and Schmidt have finished feathering their nests with $100 bills, they’ll be making an announcement rescinding the scheduled 2012 unpaid furloughs for employees across the company, and enclosing a nice check with their apology to the family of deceased P-D retiree Robert Douglas.

Don’t hold your breath Lee employees; if we’re lucky, maybe we’ll get a pizza party.

 

 

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Why Did Robert Douglas Die?

Mar 2, 2012 by

 

TNG International has a new website up and running and a new editor running things.  There’s a fresher look and an approach that feels more honest and straight from the shoulder.  It’s worth a look:  www.newsguild.org

 

Janelle Hartman, who, back in the day,  cut her journalistic teeth at the Eugene Register-Guard before working in the labor movement, recently took over the reins following the departure of Andy Zipser.  Janelle has introduced several new features, one of which – Why We Fight – kicks off with an article by our own Michael Sorkin about the life and untimely demise of retired Guild member Robert Douglas.  Michael’s story about Robert captures perfectly the gentle spirit of our brother, who stands in sharp contrast to the newspaper’s uncaring corporate owners.  It follows:

Why Did Robert Douglas Die?

The Tragic Consequences of an Employer’s Broken Promise

Michael D. Sorkin
March 1, 2012
Member, United Media Guild

Editor’s Note: Michael Sorkin’s poignant piece launches our new “Why We Fight” series, telling the personal stories that make union activism so important.

Robert Douglas collapsed and died while he was about to let his two mixed-breed dogs out the back door of his modest brick home in St. Louis. Two days later, on Dec. 16, relatives found his body on the kitchen floor. He was 59.

Robert had cared for his two rescued dogs, and he had done the same for his friends and colleagues at the St. Louis Post-Dispatch, where he had worked for nearly 40 years.

He was to the newsroom as Radar was to “M*A*S*H”: the guy we went to when we needed help.

Robert made sure we got what we needed to do our jobs, especially when the bosses said we couldn’t.

“Robert, they won’t give me a cell phone,” one reporter recalled recently at Robert’s memorial service.

“You can have a cell phone,” Robert said.

We thought he could do just about anything.

Robert was a clerk. He was one of several dozen support staff who worked behind the scene and were largely anonymous. They answered the phones, helped research stories and kept the newsroom’s machines working.

They are nearly all gone now, bought out or laid off.

The Post-Dispatch laid off Robert in October 2008. He was a member of the St. Louis Newspaper Guild (now the United Media Guild) and made an annual union wage of $39,936.

The severance package under the union contract gives Robert and other retirees health insurance.

That was important because Robert had diabetes and high blood pressure. While he was employed, he was able to stay healthy because he had good medical care.

The contract says retiree health insurance is free and for life. The company used that perk to induce more than 100 newsroom employees to take early retirement in 2005 and 2007. Now we know that the company didn’t plan to honor its promises.

Robert wanted to keep working. But when he lost his job, his union contract eased the way with a severance of $50,688 before taxes, based upon his years of employment.

He used the money to pay off his mortgage, and spent many hours fixing up his house. He told his three grown children that if anything happened to him, he wanted them to have a place to live that was free of debt.

Robert’s monthly Post-Dispatch pension was just $366, and he had no other income. He was too young for Medicare and was turned down for Medicaid. Amazingly, his modest income allowed him to pay for food and utilities while continuing to help people less fortunate.

At the memorial service, friends recounted how Robert regularly helped needy people on the street. Several times a week, he gave $3 for bus fare to an injured man unable to speak.

On Nov. 19, 2010, Lee Enterprises, owners of the Post-Dispatch, notified Robert by letter that he would have to pay 100 percent of his health insurance premiums.

The company would take the premiums out of his monthly pension check. But the pension wasn’t enough to cover the full $580 monthly premium. Robert would owe the company an additional $214 each month. He would no longer get a pension. He would have no income.

The letter from Lee said that if Robert was late in paying, he would lose his insurance and wouldn’t get it back.

On March 18, 2011, Robert signed a letter canceling his company health insurance because “I can’t afford to pay for it.”

After that, Robert resorted to a series of free clinics with limited success. One physician put Robert on a drug he had tried years earlier with terrible side effects, recalled his daughter, Erica Douglas.

In the end, Robert sometimes was able to get insulin and sometimes not. He got some hand-me-down medicine from diabetic friends.

Robert told his daughter early in December that the insulin he had then wasn’t working. He said he would go to a doctor.

But he didn’t – “he had no money,” Erica Roberts said.

Robert was trying to save money for an operation for Creamy, the older of his two aging dogs. She needed a tumor removed.

When Robert didn’t answer the phone, four family members went to his home and found his body. In the bedroom, they found Creamy dead underneath Robert’s bed. Nearby, they found Cookie, Robert’s other dog, alive but frightened.

Did Lee Enterprises kill Robert when it took away his insurance? Not directly, of course.

Lee President Mary Junck told stock analysts in 2005 when the Davenport company bought the Post-Dispatch that she would end retiree health insurance. But Junck and the company’s board had to know the likely results of cutting off health care for retirees who might not be able to get replacement insurance.

The Guild is in federal court fighting to get back retiree health insurance, and has spent more than $250,000 in legal fees, according to Shannon Duffy, the union’s business manager.

For its part, Lee has taken the unusual step of suing its own retirees. It was a preemptive strike aimed at discouraging a lawsuit against the company. Undeterred, a group of retirees recently sued Lee for fraud.

While the issue is tied up in court, more retirees will die, rejoin the job market or give up. Lee’s officers and directors have nothing personal to lose. But what if the retirees change strategy and sue to hold them accountable as individuals – and seek damages including their salaries, homes, bank accounts and 401(k)s?

Robert didn’t get a news obituary in the Post-Dispatch, and the public never would have heard of him if columnist Bill McClellan hadn’t written that Robert “was a victim of our times – caught somewhere between serious health-care reform and the old paternalistic way of companies.”

I wrote Robert’s obit for our in-house Intranet, including two paragraphs explaining how the company had taken away his health insurance. A newsroom manager edited that out saying, “Those two paragraphs really stick out.”

Yes, they did. They still do.

St. Louis Post-Dispatch reporter Michael Sorkin is an award-winning investigative journalist who started the paper’s consumer column and writes obits. He knew Robert Douglas for nearly 30 years.

This family photo from 2004 shows Robert Douglas, left, with daughter and college graduate Erica Douglas, granddaughter Teyiarra, and his son, Ivan Douglas.

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Lee Enterprises & bankruptcy: What are the odds?

Sep 21, 2011 by

By Jim Gallagher, Treasurer United Media Guild

Lee Enterprises is struggling to refinance its debt, and that has implications for our jobs at the Post-Dispatch.   The Guild will vigorously defend  its members’ interest in this matter.  Members have been asking the Guild to explain what’s happening, and Shannon asked me to give it a try.

First, a caveat:  I’m the local’s treasurer and I’ve been a reporter at the St.Louis Post-Dispatch covering business for nearly a quarter century.  But I’m not a financial analyst, accountant, investment banker or a bankruptcy lawyer.  What follows is my take on the situation, but I may be wrong.

The first thing to remember is that we work for a profitable newspaper.  As stand-alone entities, Lee’s newspapers take in about 19 percent more money than it costs to produce them.  Lee doesn’t break out results by individual newspaper.  But the Post-Dispatch represents about a quarter of Lee’s revenue.  Lee would not have an operating cash flow margin of 22 percent  if the Post-Dispatch were losing money.

That has an important implication:  No matter what happens to Lee Enterprises, the Post-Dispatch will continue publishing.  Whoever owns it will need our labor, and the Guild will represent us.

Lee’s problem is $1 billion in debt.  The company owes more money than it would bring were it put up for sale.  That debt matures in April, and the company doesn’t have $1 billion to hand to its creditors. It must refinance that debt before the deadline, or Lee will be bankrupt.

Earlier this month, Lee announced that it had reached a refinancing agreement with more than 90 percent of the holders of the biggest portion of its debt.  This is good news for Lee, but the company still has significant hurdles to overcome in completing a refinancing.

For members who don’t want to read much further, here’s my amateur forecast:

The most likely scenario is that Lee will succeed in refinancing without a dip into bankruptcy court. That’s in everyone’s interest.

The second-most likely scenario is a “prepackaged” bankruptcy.  The idea is to walk into court with a plan in hand that the vast majority of creditors agree to.  They would then use the bankruptcy process to cram it down the throats of the holdouts.  Lee would be in and out of bankruptcy quickly.

The Guild’s contract with the PD would survive Scenario 1, refinancing, and it is highly likely that it would  survive Scenario 2, a prepackaged bankruptcy.  That would  preserve our pay, benefits and limited job security.

However, Lee’s interest burden would increase substantially in any refinancing. That means continued pressure on budgets and costs for years to come.  You and I are costs.  It could also place Lee at risk of failure should the economy face a substantial recession.  Basically, the company would remain a slave to its creditors.

Members may want to take this into consideration in planning their own careers.

The third scenario — least likely but still possible — is a drag-out, contested Chapter 11 bankruptcy.  In the end, the creditors would exchange some of the debt for ownership of the company.  Lee would emerge with less debt, and new owners.  That process would probably take many months.  I’ve seen bankruptcy cases go on for years when the sides get their backs up and the judge fails to crack the whip.

The company might attempt to shed our union contract and force union concessions as part of a contested Chapter  11. The Guild would defend the interests of its members in such a case, and money would be no object.   More on bankruptcy later.

Now, let’s examine the details:

Lee’s newspapers produce strong cash flow, meaning that Lee can afford to pay substantial interest on its debt.  That’s the key to its probable survival.

In fact, if Lee could keep the current interest rates on its debt, it could continue on for years, possibly forever.  It has paid down its debt by about $102 million over the past year.

But the debt matures in April and, given the risk profile of the company, no one would willingly lend it $1 billion at affordable interest.

Lee found that out the hard way in  May when it tried to refinance the debt by issuing junk bonds.  The market shut the door on the company, and the junk market was more amenable to iffy deals back then than it is today.  In May, the rating agency Moody’s  rated Lee a CAA – that’s deep in junk bond territory and indicates a significant risk of default.

So, Lee is going to have to persuade many of the existing creditors to extend their loans, and they’ll want something in return.

Lee’s $1 billion in debt comes in two big piles.  The biggest pile is $868 million, most of which Lee took on when it vastly overpaid for Pulitzer in 2005.  The creditors hold a first mortgage on the old Lee properties, excluding the Pulitzer newspapers.  For convenience, we’ll call this the Lee debt.

The second big pile is $142.5 million.  Lee inherited this debt when it bought Pulitzer.  It’s secured by a mortgage on the old Pulitzer properties, including the Post-Dispatch, minus Tucson.  We’ll call this the Pulitzer debt.

Note the difference in collateral:  Owners of the big debt have first dibs on the old Lee properties, while the Pulitzer creditors are secured by the old Pulitzer properties.  This will become important later on.

On Sept. 8, Lee said it had reached a refinancing deal with owners of at least 90 percent of the Lee debt.  The Lee debt would be divided into two parts.   Lee would pay 7.5 percent on $690 million of that debt and 15 percent on the remaining $175 million.

The difference is the level of collateral: the lower-interest debt provide a first mortgage on Lee, excluding the Pulitzer properties.  The 15 percent debt provides a second-lien only.

The combined interest burden would be 9 percent under the proposed deal.  Under current agreements, Lee is paying  4.25 percent on the Lee debt and 10.5 percent on the Pulitzer debt, for a combined rate of 5.1 percent.

So, even without knowing the Pulitzer results, it’s apparent that Lee’s interest burden will rise substantially.  It also will have to pay $40 million in the first year on the principal of the Lee debt, with higher payments in later years.

To sweeten the deal, owners of the high-interest debt also will receive a 13 percent ownership stake in Lee Enterprises.

For that, Lee would get a four-year breather, assuming it could make the payments.  The  lower-interest loan would mature in December 2015, and the high-interest loan in 2017 under the proposed deal.

Lee has yet to find a way to refinance the Pulitzer debt.  This is only my guess, but I suspect that the difficulty may lie in the collateral.  Back in 2005, when Lee bought Pulitzer, the Pulitzer properties were roughly half the value of the company, and I don’t think the situation has changed much.  So, the creditors with 15 percent of the debt have first claim on nearly half the company in a bankruptcy.

The Pulitzer creditors may feel that they’d come out of any bankruptcy with 100 cents on the dollar, or property worth 100 cents on the dollar.  On the other hand, the Lee creditors would have to take a substantial haircut in bankruptcy.  That may make the Pulitzer creditors harder to deal with than the Lee creditors.

On the other hand, that extra collateral might make a Pulitzer refinancing salable to another investor.  In a Bloomberg story, Lee’s CFO indicated that they may try their hand at the bond market to refinance the debt.  Junk investors who wouldn’t lend Lee $1 billion with weak collateral might agree to lend $144.5 million with stronger collateral.

We won’t know whether any deal will be affordable until we know the interest rate and repayment terms on any Pulitzer refinancing.  We’ve seen debt renegotiation deals that were so onerous that they simply delayed failure.  Working against Lee is the continued weakness in advertising, a reflection of the economy, and a secular shift of ad money to the Internet.

By the way, Lee’s agreement with the Lee creditors envisions that the company will wrap up a new Pulitzer deal by January, absent a bankruptcy filing.

If the company can refinance the Pulitzer debt, it has a very good chance of avoiding bankruptcy.  Companies can generally force a deal through outside of bankruptcy court if 95 percent of each class of creditors agree.  Lee says it has more than 90 percent of the Lee debt creditors aboard.

If it can’t get 95 percent approval, Lee says it will do a prepackaged bankruptcy.  It will walk into court with a plan that nearly all creditors agree upon.

Once in bankruptcy,  a vote of only two thirds of each creditor class is required to approve a deal.  With a Pulitzer deal in hand, and with 90 percent of other creditors aboard, my guess is that the remaining creditors would cave rather than endure the expense of a bankruptcy.

But I’m no expert in this.

There’s another wrinkle here.  Some of Lee’s creditors have changed since the company last had to renegotiate its debt, in 2009. Back then, it was a conservative group of banks and insurance companies.  The Wall Street Journal in May reported that some of the company’s debt has since been bought at a discount by speculators.  The speculators were betting that they’d be able to negotiate an ownership stake in Lee as Lee faced default.

Three of the sharks mentioned in that story seem to have signed on to the renegotiated deal: Goldman Sachs, Franklin Templeton and Monarch Master Funding.  The others — Alden Capital and Alden Global Capital and Marblegate Capital — aren’t mentioned in Lee’s filings describing the deal.

Now, let’s discuss bankruptcy and labor’s position in a bankruptcy case.

No business executive in his right mind wants to take a company through bankruptcy.   The mere rumor of a bankruptcy makes business harder to do: Vendors demand cash up front; other partners become reluctant to sign contracts.  Lawyers’  fees in bankruptcy are astronomical.  Creditors receive no interest while the bankruptcy process grinds on, and the damage to the business may reduce creditors’ recovery.

If we get into a contested Chapter 11 rather than a prepack, it’s very possible that current shareholders would be wiped out.  Lee’s board, representing shareholders, would try to avoid this.  Lee’s board members are shareholders, and so are its senior managers.

So, both Lee and its creditors will try to work something out short of bankruptcy.

A collective bargaining agreement remains in effect during bankruptcy unless the judge throws it out.  Companies can try to shed a union contact, but they must follow a procedure.  First, they must try to bargain concessions with the union.  If that fails, they can ask the judge to throw the contract out.  There would be a hearing to present evidence.

The judge can toss the contract if the judge finds that the concessions the company requested are “necessary” to the company’s emergence from bankruptcy, and that they treat “all parties fairly and equitably.”  That said, judges tend to favor companies over unions in these situations.

If a contract was thrown out, the company could implement working conditions no different than those in its last bargaining proposal.  The union then would be free to take economic action against the company, including a strike among other things.

Lee has not approached the Guild about renegotiating  the contract.

We believe that Lee would leave our contract alone in a prepackaged case.  The idea in a prepack is to get in and out of bankruptcy quickly, thus limiting the damage.  Going after our contract would cause delay and raise the possibility of a labor war – not something they need while trying to re-establish confidence from financial markets and customers.

Besides, our membership is small in the context of Lee, and we’ve already given concessions.  It’s difficult to argue that hurting our members is necessary to rescue a company making a good operating profit.

We simply can’t guess at how Lee might view our contract in a contested Chapter 11. If past practice was followed, our parent union in Washington would engage a good bankruptcy law firm to represent our local.  This would be at the parent union’s expense.  Our local is confident that past practice will be followed.

In a bankruptcy, we would stand in the position of a creditor – our contract requires them to pay us.  In past newspaper bankruptcies, the Guild has been quite successful in getting its representative onto the “creditors committee.”  This committee gets an inside view of the bankrupt company’s finances and negotiates a settlement with the company.  We would also represent our interests separately before the court.

In any case, the Guild will strenuously defend the interests of its members.  Your union has begun preliminary preparations for the possibility of a bankruptcy filing. Cost will be no object where members’ welfare is at stake.

 

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Lee pushing to avoid bankruptcy

Aug 11, 2011 by

The Wall Street Journal is reporting that Lee Enterprises is in the process of trying to cut a deal a with it’s creditors to avoid bankruptcy. Read the full article here http://t.co/P9xjjZo
The Guild is closely watching developments.

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