The lights will stay on at the Orange County Register, but the staff remains in the dark.

A bankruptcy judge last week approved a $52.3 million sale of Freedom Communications and its major newspapers, the Register and Riverside Press-Enterprise, to Digital First Media, owner of nine daily papers in the greater L.A. area, including the Los Angeles Daily News and Pasadena Star-News.

But in the days after the deal was announced, no representative of Digital First came by to show the flag. The quiet was particularly disconcerting because the Denver-based company has a track record of slashing staff and budgets at its group of 65 newspapers nationwide. Earlier this month, it announced the consolidation of six papers in Northern California into two operations, resulting in a 20 percent cut in staff and the end of the Oakland Tribune.

Still, said one Register staffer who spoke on condition of anonymity, there is a sense that as harsh as life might be under Digital First, the situation could not be worse than it was under the ailing Freedom – and that with the newspaper’s new place as the flagship of the parent company, things might actually improve.

Even as the flagship, however, the former Freedom paper should expect to do more with less. And the same goes for sister publication the Press-Enterprise.

“Digital First is about maximizing profit,” said Ken Doctor, news industry analyst for Harvard University’s Nieman Journalism Lab. “If you look at the company’s history, it has maintained a fairly steady profit by reducing its head count in newsrooms and operations. Undoubtedly, there will be staff cuts.”

Gustavo Arellano, editor of the OC Weekly newspaper, agreed.

Creditors Burned

Digital First Media’s $52.3 million deal to buy the publishing assets of Freedom Communications is the kind of transaction that leaves creditors essentially short-changed.

The sale is set to be finalized by March 31, when a $4.5 million loan from Freedom’s biggest creditor, Silver Point Capital of Greenwich, Conn., comes due.

Digital First’s assets were valued at $59 million, according to court documents. Freedom’s liabilities came to $214 million, largely owed to hundreds of smaller unsecured creditors.

All of the creditors listed in the proceedings with priority unsecured claims, such as City National Bank, which is owed $800,000, will be paid out of a $3.1 million pool that has been set aside.

City National is the largest of more than 155 creditors based in the city of Los Angeles. A bank spokeswoman declined to comment about the nature of the debt as a matter of policy.

The list of creditors is populated by nearly every local city agency as well as former employees and contractors seeking wages or fees ranging from $100 to $60,000.

– Kristin Marguerite Doidge

“The Digital First end game is to wring out as much money as possible and then sell to someone else,” he said. “This is like trying to squeeze pennies out of lemons. Ultimately, it’s the readers who will lose as there will be so many more stories left untold.

“I really feel for the staff. The only solace they have is that they were not bought out by their mortal enemy the Los Angeles Times. If you’re going to get nuked, you’d rather it be by someone else.”

Bid blocked

Times parent Tribune Publishing Co. did make a $56 million bid at auction for the assets of bankrupt Freedom, but the threat of an antitrust action by the U.S. Department of Justice caused Freedom to turn away from the deal.

In a last minute upset worthy of the March Madness tournament, underdog Digital First swooped in for the win with its $52.3 million bid.

“This is what competition should look like,” said Hamed Khorsand, a Woodland Hills-based analyst at BWS Financial Inc.

The deal is set to close March 31, after which Digital First’s group of 11 local dailies and more than a dozen community weeklies will become known as the Southern California News Group and be overseen by Publisher Ron Hasse.

Hasse declined to comment on postacquisition plans. In a statement, Digital First said it would restore vitality to its newly acquired papers.

Digital First is owned by Alden Global Capital, a New York hedge fund that specializes in monetizing distressed assets, which can be found in abundance in a newspaper world of declining readership and advertising revenue.

As for how the newly acquired papers will be monetized, nothing has been announced yet.

In January, nearly 1,000 workers at Digital First launched a pressure group under the name News Matters aimed at winning wage increases, claiming on its website that many of their colleagues have gone eight years without a raise.

Ironically, it might be Tribune Publishing that emerges with the stronger “digital first” strategy in the region. Newly appointed Chief Executive Michael Ferro announced last month that the company is operating with a new “content-first” strategy.

“Tribune is interested in investing in the digital side of the business,” said analyst Khorsand. “In Los Angeles, that means LATimes.com and the new LA.com.”

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