UPI gets reprieve as it struggles to stay in business
The nation's second largest wire service appears to have gotten a reprieve from one of its major lenders after announcing that it was about to ask for court protection from its creditors. United Press International's board of directors voted unanimously Friday to authorize chairman Luis G. Nogales to file under Chapter 11 of the bankruptcy code to protect the company's assets from its creditors.
``The expectation is that they [the papers] will be filed, but as of the moment we do not have a day or a time,'' said UPI spokesman David Wickenden.
The vote came after the company announced earlier in the day that it did not have enough money to cover current paychecks for its 2,000 employees. UPI, one of the nation's two major wire services, is facing debts estimated to be between $17 million and $20 million.
The payroll shortfall occurred last week after UPI's principal lender, Foothill Capital Corporation of Los Angeles, cut off funding to the wire service. Foothill was said to be dissatisfied with management's efforts to trim current spending.
Then Saturday, the wire service said it had reached agreement in principle with Foothill to continue financing. In a message to UPI's staff, Mr. Nogales said that under the agreement with Foothill, the lender would provide financing ``that will put in place a financial structure to make funds available to cover the paychecks . . . as well as the company's ongoing obligations.''
``We are confident the financing will be in place early in the new week,'' he said.
At the same time, UPI said it was eliminating about 100 positions, 20 of which were already vacant as the result of attrition. In addition, it is raising its subscription rates to 800 newspapers and 1,500 broadcasters by 9.9 percent.
The 78-year-old wire service has long maintained a brisk competition with its rival, the Associated Press. The AP is this country's largest news wire service. Concerns have been raised among journalists that should UPI go out of business, the timely, competitive nature of wire news might suffer.
Most small local newspapers and radio stations in the United States rely on either AP, UPI, or both for the bulk of their national and international coverage.
UPI officials maintain that filing under Chapter 11 would not affect the company's day-to-day news coverage. Maxwell McCrohon, editor-in-chief of UPI and a member of the board, was quoted as saying, ``UPI's basic news, picture, and feature reports will not be interrupted during this period of financial reorganization.''
Mr. Wickenden says that, under Chapter 11 provisions, UPI would run the news organization as it normally does and would continue to streamline the company's operations.
But, he adds, under Chapter 11 a judge or a court-appointed trustee will participate in reorganization and recapitalization negotiations.
``It gives us greater flexibility, greater breathing room, and that added protection under the jurisdiction of the courts,'' Wickenden says.
The Wire Service Guild, which represents UPI's 900 editorial employees, supported the decision to file under Chapter 11. A statement released Friday said: ``It is the union's opinion that a Chapter 11 filing at this time is necessary to protect many employee rights and to protect company assets.''
In addition to Foothill, major creditors include AT&T and RCA Corporation. Spokesmen for all three firms said they have no comment on UPI's current financial position.
Despite years of unprofitable operations, UPI has recorded profits in each of the past five months. But, as Wickenden put it, ``The margin of profitable operations was thin.''
Last September UPI employees accepted an across-the-board 25 percent salary cut. Later, a portion of the cut was restored. In addition, some 150 jobs were eliminated through layoffs and attrition.