The managers of United Press International said yesterday that they are holding discussions with eight companies about a possible sale of the financially troubled wire service, and that they have received preliminary offers from two of the suitors.
They also told creditors that the company has turned a $400,000 profit in the six weeks since it filed for Chapter 11 bankruptcy protection, and predicted that the profit for the year could reach $2 million or $3 million -- UPI's first profitable year in more than two decades.
The UPI officials would not identify the companies they were talking to about a possible takeover, or give any details of the negotiations. But UPI President Ray Wechsler said "several are in a more advanced stage."
UPI's leaders also said that they had balked at an offer from rival news service Reuter of $5 million and other considerations for just the national news portions of UPI's service. Reuter planned to shut down the rest of UPI's services, including its broadcast news operation, they said.
UPI Chairman Luis Nogales said he would rather see the company sold intact, and that the other potential suitors were interested in preserving UPI's entire print and broadcast news service. "The greatest value of this company is to continue to operate it as a general news service," he said. Reuter said Thursday it had broken off negotiations with UPI.
The reorganization of UPI under Chapter 11 of the federal bankruptcy statutes is expected to culminate in the sale of the company. Yesterday, Nogales and other UPI executives briefed representatives of the company's creditors on the company's financial condition and the status of negotiations over a possible sale.
"I want to acknowledge and thank the creditors for their support," Nogales said at the outset of the two-hour meeting. "We would not be operating at this time without their support."
Nogales and Wechsler said the company had been operating with positive cash flow for several months, and that heightened efforts to collect back debts had kept the cash flow positive even after the bankruptcy filing. "Our cash flow is the best it's been since I joined this company two years ago," Nogales said. Under bankruptcy law, the UPI executives' statements at the meeting were under oath.
Wechsler told the creditors that UPI had collected about $6.7 million in the month after it declared bankruptcy in late April, and had spent about $5.5 million in the period. After adjusting for more than $700,000 in expenses that the company has not yet paid, Wechsler said, that gave UPI a profit of more than $400,000. In addition to the stepped-up debt-collection effort, the profit was also attributed to a 9.9 percent rate increase imposed on UPI clients May 1, Wechsler said.
Under bankruptcy law, UPI is protected from its creditors while it reorganizes its finances. So the company can use any profit it makes to strengthen its financial situation. "Clearly, profit is essential when you're in a Chapter 11 proceeding and certainly for this company," Wechsler said.
The more stabilized UPI's financial situation is, the easier it will be to sell the company. And UPI's executives said they have been contacted by several potential buyers, with the list changing weekly as some possible suitors dropped out and others came forward. They said the possible buyers included companies both inside and outside the media.
Reuter has been the most prominently mentioned of UPI's possible suitors, but it now appears that that company has lost whatever edge it had in the bidding. Nogales said UPI was reluctant to give key information requested by Reuter to a competitor, and said his company also was unwilling to give Reuter any kind of advantages it seemed to be asking in negotiations, especially when other potential buyers might be willing to make more attractive offers.
If worst came to worst and a buyer could not be found, Nogales said, UPI might be able to go through a standard bankruptcy reorganization and keep operating -- although he said, "We would least prefer to rebuild this company on its own resources."
And Jules Teitlebaum, an attorney for UPI's unsecured creditors committee, said at the meeting, "All of the companies here recognize the fact that this company needs recapitalization, whether it be by sale or refinancing. . . . This company needs something to keep it going."