In Re Journal Register Co.

National media giant the Journal Register Company and its subsidiaries (the Journal) (debtors) owned and operated newspapers, other publications, websites, and printing facilities. The Journal sustained losses because of industry-wide decline in readership, increased internet competition, recession, and weak advertising demand. As its debt reached $695 million, the Journal entered a forbearance agreement with creditors that required retaining a restructuring advisor and proposing a five-year comprehensive restructuring plan. The Journal retained Robert Conway as chief restructuring advisor, developed a five-year plan, and filed for reorganization under Chapter 11. The five-year plan provided the basis for an agreement among a supermajority of secured lenders that supported a proposed reorganization plan. The secured creditors agreed to a “gift” of part of their proceeds to trade creditors in Class 4, which contained all the general unsecured creditors. An estimated $6.6 million would be distributed only to trade creditors who did not object to the plan and released claims against the Journal or its lenders. The disclosure statement explained that releases were essential to the lenders making the gift. Conway testified that the gift was critical to the Journal’s future and its business plan because it would ensure goodwill and survival of financially distressed trade creditors essential to the Journal’s daily operations and long-term survival. The gift would be placed in a trade account that would not constitute Journal property and undistributed amounts returned to the lenders. The secured and unsecured creditors voted overwhelmingly to approve the plan, but five creditors objected. Central States lodged the principal objection, arguing the plan discriminated unfairly among Class 4 unsecured creditors.