Two investors in Freedom Communications are asking a Delaware court to put the Santa Ana newspaper company into receivership, saying the owner of the Orange County Register is “insolvent” and beset by “mismanagement.”
The lawsuit by minority shareholders is the latest sign of strife at a company that this year has endured rounds of layoffs, lawsuits, leadership shake-ups and the launching and closing of a new daily paper in Los Angeles.
Abbey Financial and Old Colony 2012 Investment Fund said in their complaint, filed confidentially with the Delaware Chancery Court last week and disclosed this week, that Freedom needs independent oversight as soon as possible.
The investors said the operation faces an emergency “posed by an imminent sale of a significant real estate asset and the financial distress of the company due to mismanagement.”
The complaint alleges that Freedom co-owners Aaron Kushner and Eric Spitz allowed lender Silver Point Finance to have outsized influence over the media company’s financial decisions, including a planned sale of a 14.3-acre plot surrounding the Register’s Santa Ana headquarters.
Initial offers on the site were due on Oct. 22, said Justin Esayian of the Hoffman Co., the brokerage representing Freedom. Freedom didn’t set an asking price but received a substantial number of offers, which it is reviewing, Esayian said.
Abbey and Old Colony supported the land sale a year ago, said Freedom spokesman Eric Morgan. He called their complaint “meritless and unfounded” and said Freedom is not considering filing for bankruptcy.
Morgan said, the court rejected the investors’ motion Thursday to expedite the appointment of a receiver. Attorneys for the investors did not respond to requests for comment.
In alleging that Freedom is insolvent, the complaint said the company has spent at least the past nine months “placating” creditors that have been pressuring the firm “to the detriment of other creditors.”
Silver Point, a subsidiary of Silver Point Capital in Greenwich, Conn., holds the mortgages on all of Freedom’s real property as well as a first priority lien on the company’s other assets, according to the complaint.
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Receiver sought for O.C. Register