A trustee will run Alter Communications Inc., publisher of the Baltimore Jewish Times, a U.S. Bankruptcy Court judge ordered late Friday after determining the company had exhausted all avenues to reorganize under Chapter 11.
U.S. Bankruptcy Court Judge Nancy V. Alquist rejected an 11th-hour bid that Alter and its attorneys said could prevent the 93-year-old Jewish Times from folding as soon as next week.
Under Alter's proposal, presented in court Friday, Washington Jewish Week publisher WJW Group LLC was prepared to make a formal offer for Alter's assets by Monday and close the deal by Wednesday in time to allow the weekly magazine to publish Friday.
Otherwise, the company, which has never missed an issue, would run out of cash next week to print and distribute the paper and pay its 40 employees, essentially delivering a death blow to the company, Andrew A. Buerger, Alter's chief executive officer, said in court Friday.
It's unclear what happens next to the publication. After the hearing, Buerger said he told some of his employees that he would see them on Monday morning and that "our job is to keep it open until we can find a buyer."
Alter's key creditor, its former printer, H.G. Roebuck & Son Inc., had asked the court to appoint a trustee, arguing that failure on the part of all parties to agree to a reorganization plan by a Friday morning deadline and Alter's precarious financial position after losses in recent months left no other option.
Company financial statements show losses of more than $430,000 in two months, according to testimony.
Alquist chastised the company for the failure to agree within its own ranks on a reorganization plan. The company withdrew its plan despite the support of an investor.
"The debtor's own dysfunction and deadlock caused this to happen," Alquist said. "The losses exist on a substantial and continuing basis, and that is in the hands of current management."
And attempting to rush through a sale in three business days "doesn't even hold a whiff of due process," the judge said.
Alter, which also publishes Style magazine, filed for bankruptcy in April 2010, after Roebuck had filed a breach-of-contract lawsuit against the company and was awarded a $362,000 judgment. The companies have been in a dispute over a reorganization plan since then.
A bankruptcy judge who handled the case last fall ordered the companies to file a joint plan and extended the deadline. But no agreement was reached. Instead, Alter filed its own plan in December, which included a $600,000 infusion from an investor group headed by Dr. Scott Rifkin, a Baltimore physician, in exchange for an 80 percent stake. Roebuck filed a separate plan, with WJW Group as the major investor, in February.
Attorneys for both sides told the judge Friday that neither of those plans ended up being viable.
WJW Group pulled out of the plan with Roebuck after spending six hours reviewing Alter's books on Sunday. WJW then decided it would be prepared to purchase the assets for at least $400,000, the amount owed to lender Wells Fargo, according to court testimony.
And Alter decided not go ahead with its own plan with Rifkin because members of Alter's board of directors and shareholders disagreed about the direction, said Maria Ellena Chavez-Ruark, an attorney for Alter. Ultimately, she said, all board members and shareholders united behind the plan to sell to WJW, she said.
That option would give employees the guarantee that "if they show up on Monday, they will be paid," Buerger said in testimony, adding that employees have been paid only through March 9 and that morale is at an all-time low. When asked by an attorney during testimony about the consequences if they stopped publishing, he said: "The company would shut down and lose all its value. The only value it has is the operation."
He said the company has about $124,000 in the bank, including a $100,000 loan to cover urgent expenses from Alter's co-publisher Ronnie Buerger, which Alquist approved Tuesday. Alter needs to pay $80,000 in payroll as well as printing and postage costs each week.
David S. Musgrave, an attorney representing Ronnie Buerger, pleaded with the judge to hold off on appointing a trustee to give the company time to work out the deal with WJW or entertain other bidders.
"We just don't want the company to shut down," he said. "A trustee will have nothing to do but collect receivables and sell the equipment and would not sell the company as a going concern."
Craig Burke, publisher of WJW Group, said during the hearing that the company was prepared to submit an offer for Alter's assets by Monday and has the funds available. He said he had discussions with the Buergers in which the family would retain a 12 percent to 20 percent stake in the company.
If the company misses next week's publication date, "it could be devastating to the business," he said.
Edmund A. Goldberg, a lawyer with the Office of the U.S. Trustee, who has been monitoring the negotiations, said a trustee could be appointed quickly and could potentially oversee a sale of the company.