Community Papers of WNY shuts its doors
The closing last week of a chain of weekly Western New York newspapers hit close to home for this journalist. I was saddened and frustrated upon hearing the news, but the impact spread far beyond my personal feelings and opinions of what happened.
When Community Papers of WNY announced it would cease operations July 25, it ended a more than century run for The Hamburg Sun — formerly the Erie County Independent — and left the town and village of Hamburg and surrounding areas without a community newspaper. It also left such places as Gowanda and Springville without a source of community news.
While I worked for the entire chain of newspapers when it was owned by Metro Group Inc. as the group’s sports editor for my final two years with the company, it was in the Hamburg area that I spent most of my time in the office and where I chiefly covered local athletics for seven years. The area embraced its local newspaper and readers appreciated the hard work that went into the weekly publication.
Less than two years after buying the chain, which included the flagship paper in Hamburg, Community Papers of WNY declared bankruptcy in December 2015. When a Buffalo bankruptcy court on July 18 lifted the automatic stay order, permitting creditors such as The Buffalo News to exercise their right to collect more than $2 million against owner James Austin, the company seemed out of options.
“I was informed (of the court’s decision) late Friday afternoon, and worked all weekend to fix the situation,” Austin said in a companywide email to employees announcing the closing. “This is not what I thought would happen.”
The Buffalo News is the debtor’s largest secured creditor and is owed $1.7 million, according to court filings. The News brought the initial motion for entry of an order granting relief from the automatic stay.
The court noted that Community Newspapers of WNY failed to file a Sale Motion or a Plan and Disclosure Statement or attempt to test the market for the debtor’s assets in advance of an auction by the established July 15 deadline. The News was entitled to the relief it requested under terms of the Cash Collateral Stipulation.
Austin was ordered to surrender any pledged interest, cash collateral or any other collateral owed to The Buffalo News, which was allowed to foreclose on any liens owed.
According to bankruptcy attorney Robert Rock, managing partner at Tully Rinckey, a Chapter 11 filing provides an automatic stay from any action to collect debt owed by the entity filing the position, also known as the debtor. It is almost as if a company entering Chapter 11 can write its own federal court injunction and freeze the status quo, he said, adding that the filing stops all entities owed money from seizing company assets.
However, the automatic stay is not permanent. The court can take away the stay just as fast as it was granted. A motion for relief of a stay can come in many forms, Rock said. A creditor can move for relief if it demonstrates cause, including a lack of adequate protection if the creditor’s position is deteriorating. Often that occurs when collateral value is decreasing because the interest and debt that the creditor holds is increasing.
“The creditor can come in and tell the judge that their position is deteriorating. They’re owed, say, $100 and their collateral right now is worth $75. And in a month from now it’s only going to be worth $50. So they tell the judge, ‘You need to let us go in now and at least get the $75,’” Rock said.
Some may consider this just another sign of a dying industry. But it seems to be more of a result of mismanagement at the ownership level than anything else.
These newspapers represented more than just the place I worked prior to joining the Buffalo Law Journal. They were an integral part of the community in places without another weekly and became a source of information and news in such towns as Lancaster, Cheektowaga, Clarence, West Seneca, Orchard Park, Tonawanda, North Tonawanda, Kenmore, Lockport and South and North Buffalo, where the company published other Sun and Source newspapers. It also published a number of Pennysavers and other publications.
The Sun in Hamburg covered not only the town and village but the Towns of Eden, Evans, Brant and North Collins and the villages of Angola, Farnham and Blasdell. The Erie County Independent started in 1875 and became The Hamburg Sun in 1945 when Dick Allen, a former employee of the Independent, bought the newspaper. H&K Publications owned the Hamburg Sun, as well as the Springville Journal and Gowanda News, until it sold the papers to Metro Group Inc. in 2006. This year, the Springville Journal was celebrating its 150th year of publication.
In addition to communities losing their papers, I feel for the dozens of people now without jobs, many of whom I know well. At the time of the bankruptcy, the company reported having 200 employees, many of them part-time. I’ve heard from a number of them who are out of a job, as well as former employees of the company also reeling over the news.
But there may be light at the end of the tunnel. Warren Colville, publisher and president of The Buffalo News, said he wouldn’t rule out that The News or someone else could reopen some community papers. As of last week, there was talk of interest in opening newspapers in some of the Southtowns locations, including Springville, that have lost community news outlets.
Chapter 11 cases typically go in one of two directions, according to Rock: A business can reorganize and rewrite its secured and unsecured indebtedness by negotiating with creditors or cut off aspects of the business that are not profitable and focus on the cash cows of the company. A few weeks before the closing announcement, Community Newspapers of WNY had shut down a handful of its less-lucrative newspapers and products.
“If there’s common ownership and one paper is making money and the other is not, somebody may want to acquire one of those papers, so you may just close it down and save money there or you may just want to sell it,” Rock said. “You can reorganize, you can have a partial liquidation – where you’re selling off some of your assets – or your plan can simply be to sell the whole kit and caboodle. When you’re not going to have sufficient operating capital, the choice is either to sell the assets or close down.”
However, once the operation closes, as in the case of Community Newspapers of WNY, it can still sell the company’s assets, he said, allowing an interested party to purchase and reopen one or some of the products. There is also a chance that someone else with experience in owning newspapers would like to take a chance and open a newspaper in one of the affected areas.
The print newspaper business may not be an ideal industry to get into these days but investing in these communities is certainly worth the risk. I, for one, am a believer that a place such as Hamburg is more than deserving of having this valuable community resource back.
Michael Petro is editor and reporter for the Buffalo Law Journal
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