Lee Files Chapter 11


Lee Enterprises formally submitted the necessary paperwork in Wilmington, Deleware bankruptcy court this morning to refinance its roughly one billion dollar debt.


Lee’s action came after the media corporation announced last week that it would enter into Chapter 11.  That announcement understandably upset current and former employees, as they wondered what impact, if any, the filing would have on their lives and burned up the phone lines between those individuals and this office.


Our initial discussions with P-D management were met with assurances that Lee had no intention of scrapping collective bargaining agreements or using the bankruptcy court to negate our federal litigation surrounding retiree medical benefits.  However, in those first 24 to 48 hours, those assurances were vague and did not provide us with the certainty we were seeking (to be fair, I am not suggesting that anyone was withholding information, what I think was more likely is that those to whom we were speaking were not yet in possession of all the facts).  Now, while that was proceeding, the Guild was huddling with attorneys, some at our international in DC, as well as others who specialize in bankruptcy law at various points on the map.  During this time we didn’t post much on this site because we didn’t want to jump the gun, get it wrong and misinform anyone.  Other than acknowledging Lee’s announcement, we made a decision to wait until we had a better understanding of just how things would play out before stating anything unequivocally.


Bankruptcy law is (hopefully) not something the average person comes into contact with, so there is often quite a bit of confusion on just how such things proceed. Most people understand that creditors are often forced to take less than what they are owed (‘haircut’ is the term used in the industry) and make the assumption that everything is up for grabs.  Such is not always the case; it depends on the filing.  In Lee’s case, this is a prepackaged filing and most of the creditors (94%) have already agreed to terms.


Collective bargaining agreements can get a haircut in bankruptcy court but the corporation must file under section 1113 of the code.  Retiree benefits, by the way, fall under section 1114.  Those two sections have a somewhat higher bar, so to speak, offering more protection for employees and retirees than normal creditors or vendors.  Still, a corporation can file and try to make the claim that they need relief in order to remain viable.  In more recent conversations with P-D management, they have assured this office that both CEO Mary Junck and CFO Carl Schmidt have stated such filings would not occur and all indications are that they were telling us the truth.  In filing their plan of reorganization today, Lee stated (section 6.3, page 31) that they were assuming (as opposed to rejecting) all collective bargaining agreements.  So that’s certainly good news for Post-Dispatch employees.


Our retirees should know that, when a corporation goes into bankruptcy, any lawsuit in which it is involved is automatically stayed.  And the court can deal with those lawsuits and decide them.  Today, Lee also submitted paperwork detailing their how they want the bankruptcy court to deal with all their pending litigation (besides ours, the corporation is involved with three other suits).  That is found in Section G (pages 35 and 36) of Lee’s Solicitation and Disclosure Statement and reads:

“The Prospective Debtors anticipate that, to the extent any litigation is not resolved
prior to the Effective Date of the Plan and/or removed by the Debtors to federal court consistent with their powers under applicable law, such litigation will continue after the Effective Date in the forum(s) in which it was initiated.”


Our attorneys are still going over all this with a fine-tooth comb but it appears that the bankruptcy judge will refrain from getting involved in our litigation and, upon emerging from bankruptcy (hoped by Lee to be within 45-60 days), both parties will pick up where they left off with the retiree medical lawsuit.


When a corporation files for Chapter 11 protection, its unsecured creditors can call for the formation of a creditors committee.  Being on that creditors committee means more influence in determining how things are going to get resolved.  Arguments among unhappy committee members could keep a corporation in bankruptcy, delaying its emergence for months, even years. The Guild is well-aware of the potential here to inject itself into the proceedings and perhaps have the tail wag the dog for a while but such knowledge must be tempered by our guiding principal to never cause harm to a member or to do anything that might put their jobs at risk.  Raising hell on a creditors committee (fun as that might be) might only succeed in delaying Lee’s recovery and cause more belt-tightening (read layoffs) at the paper.  We can’t concern ourselves with just one aspect of this; we’ve got to step back and view this thing in its entirety.


TNG has seen numerous corporations file for bankruptcy and – in all but one instance – has managed to get itself appointed to the unsecured creditors committee (Media News was the exception and the reason was because it was a prepackaged filing and there was no unsecured creditors committee).  Events seem to be unfolding just as Lee said they would and we presently have no reason to believe that a creditors committee will be formed.  Also, with no apparent attack on our contact or our lawsuit, we have no plans to call for one.


Still, The Guild is well aware of all that could still go south and we are watching. And if, over the next few days we suddenly think for some reason that our members rights are at risk we would not hesitate for call for one at once.


I hope this provides a little clearer understanding for our members and I hope that each one of you has a safe and happy holiday season.