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Dan’s Papers Files For Bankruptcy on Long Island

dans-papers-bankruptcy [1]Written by Craig D. Robins, Esq.
 
Dan’s Papers, a venerable newspaper institution in the Hamptons for decades, filed for Chapter 11 protection last week on Long Island.
 
Often referred to as the “biggest paper in the Hamptons,” Dan’s Papers has graced the entryway of hundreds of East End establishments.
 
I’ve read Dan’s Papers as long as long as I can remember, every time I ventured to the Hamptons or Montauk.  The paper always had a unique quirky feel and I often read it on the sand at the beach.  It seemed to set the tone for the Hampton’s community.
 
Bankruptcy Filing Information for Dan’s Papers / Brown Publishing Co.
 
On April 30, 2010, Brown Publishing Co., the publisher of Dan’s Papers, filed a Chapter 11 case in the Central Islip Bankruptcy Court which is in the Eastern District of New York.  The case number is 10-73295.  There are 14 other affiliated bankruptcy filings.
 
The debtor is being represented by Edward M. Fox, Esq. of the New York City office of K&L Gates LLP, an international law firm with 1,900 attorneys. 
 
The case is assigned to Central Islip Bankruptcy Court Judge Dorothy T. Eisenberg.
 
According to details reported in the bankruptcy filing, Brown Publishing is a closely-held Cincinnatii-based company.  The debtor and its 14 affiliates had assets of $94.1 million and debts of $104.6 million in the period just before filing.
 
The debtor’s attorneys filed a flurry of first-day orders.  Judge Eisenberg presided over hearings on these motions last week.  Some of them were adjourned to June 1, 2010.
 
How Much of a Retainer Did the Debtor’s Attorney Receive?
 
The debtor paid K&L Gates a pre-petition retainer of $350,000. 
 
They also disclosed their billing rates which are $675 to $935 for partner-level attorneys, $290 to $550 for associates, and $260 to $270 for para-legals.
 
In the one-year pre-petition period, K&L Gates billed the debtor $620,919 for fees and disbursements.
 
Many, Many Possible Conflicts of Interest for Debtor’s Attorney
 
One aspect of the attorney’s application for retention that I found fascinating was that K&L Gates did a conflicts search prior to filing.  They disclosed that of the debtor’s 1,250 creditors, the law firm identified 483 persons or entities which are creditors or parties in interest that they represent in unrelated matters or may have represented in the past.
 
K&L Gates agreed not to represent any of these parties in any matter adverse to the debtor or the bankruptcy estate.
 
It will be interesting to see what the position of the U.S. Trustee is regarding these conflicts.
 
Loss of Advertising Revenue Is the Cause of Dan’s Papers Debt Problems
 
The debtor stated that the paper lost a significant amount of advertising revenue.  This was due in large part because a large part of Dan’s advertising is for real estate, and the East End real estate market has suffered markedly.
 
Dan Rattiner is the Founder of Dan’s Papers
 
Dan Rattiner, who is now in his seventies, began publishing East End papers 50 years ago.  He started while he was still in college, just before his senior year.  His first paper, the Montauk Pioneer, rolled off the press in 1960.
 
Until the he recently sold the Dan’s Papers, Mr. Rattiner controlled almost every aspect of its publication.
 
In a recent Dan’s Papers blog post [2], Mr. Rattiner proclaimed that the paper isn’t going anywhere. “Brown’s bankruptcy is not about shutting down and selling off the pieces.  In fact, everything will be proceeding as normal. 
 
Dan’s Papers’ Current Owner Recently Purchased the Paper
 
At the height of the real estate boom, which was 2007 to 2008, Brown Publishing embarked on a debt-financed expansion strategy and bought the paper from Mr. Rattiner.  They also bought up dozens of other papers across the country.
 
Brown Publishing is one of the largest newspaper publishers in Ohio.
 
What makes Dan’s Papers very appealing is that the household income of its readers averages a whopping $381,000 per year.
 
Unfortunately, this newspaper bankruptcy filing is just one of many that we’ve seen in this country over the past two years — victims of the recession as well as a trend against advertising in print media.  The Los Angeles Times and Chicago Tribune (former owner of Newsday) — two behemoths of newspaper publshing — have both sought Chapter 11 bankruptcy protection.
 
Information about the Creditors
 
In the bankruptcy filing, the petition indicates that the debtor owes its five largest secured creditors $70.5 million, and that there is collateral with a book value of $94.9 million covering this debt.
 
The largest unsecured creditors appear to be providers of newsprint.  These include Abitibi Consolidated Sales, a unit of AbitibiBowater Inc, who is owed $296,256; White Birch Paper Co, who is owed $219,150; and Page Cooperative, who is owed $195,680.
 
Who Are the Affiliates of Brown Publishing?
 
Brown has a number of affiliates including Delaware Gazette Co., Texas Business News LLC and Utah Business Publishers.  Brown publishes 15 paid daily papers, 32 paid weekly papers, 41 free publications, 11 paid business publications, and 51 newspapers.
 
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