East Valley Tribune owner to enter bankruptcy this week, says WSJ

By Nick R. Martin | August 30th, 2009 | 5:44 pm | No Comments »

The corporate owner of the East Valley Tribune newspaper plans to declare bankruptcy this week, according to a report posted online today by the Wall Street Journal.

The move by Freedom Communications, the media chain headquartered in Irvine, Calif., would be the latest blow to the newspaper industry in Arizona, which already this year has seen the shutdown of the state’s oldest newspaper and the layoffs of more than 300 workers.

It is unclear what effect the bankruptcy will have on the company’s news outlets here in the state, which, beyond the Mesa-based Tribune, also include the Ahwatukee Foothills News in Phoenix and the Yuma Sun. The company owns more than 100 newspapers and television stations nationwide.

Freedom has been struggling with a mountain of debt it took on in 2004 when the founding Hoiles family handed 40 percent of the company over to large private-equity firms. As newspaper revenues have declined in recent years, the payments on that debt became increasingly harder for the company to make.

The Wall Street Journal reported that the bankruptcy will likely wipe out remaining members of the Hoiles family, which still maintained control of the company..

For the local East Valley Tribune, it has been a roller coaster year. In January, the paper laid off some 40 percent of its staff as it switched from a daily publication to one that published just four days a week. (Note: I was among the 142 people cut at the time.) Later in the year, the paper announced it would drop another day of print, publishing just three days a week.

Then in April, the newspaper earned the highest honor in its history, being named the winner of a Pulitzer Prize. Two reporters, one of whom was also laid off in January, won the prize for their work on a series of articles last year that exposed problems with immigration enforcement by the Maricopa County Sheriff’s Office.

Two months later, Freedom announced a company-wide pay cut for its employees, dropping wages by 5 percent as it predicted its outcome would “remain weak for many months to come.”

All the while, Freedom was also undergoing a change in its leadership. The company’s chief executive, Scott Flanders, who had led the company since 2006, resigned in June to take a job at the head of the adult entertainment company Playboy Enterprises.

By July, interim CEO Burl Osborne was floating the idea that the company could declare bankruptcy to help it restructure its debt.