United Press International said yesterday it will lay off 80 employes and close several bureaus around the country, the first step in a reorganization of the wire service, which said Friday it will file for protection from creditors under federal bankruptcy law.
The news agency, which has not yet officially filed for bankruptcy, also said yesterday it had reached agreement with its biggest creditor to provide funding to keep UPI operating through the reorganization and, more immediately, to cover paychecks that were issued last week without sufficient funds.
UPI also said it is raising rates to its 800 newspaper and 1,500 broadcast subscribers by 9.9 percent, effective immediately, and it told the subscribers in letters sent late last week that the higher rates, staff cutbacks and other cost-cutting moves are "essential elements" in the reorganization.
The 80 employes being terminated were notified by telephone or telegram late Friday and yesterday, UPI said.
The company said the elimination of another 20 vacant positions would bring to 100 the number of jobs being cut from its previous total of 1,850.
The wire service said in a statement that the cuts are necessary "to reduce operating costs."
The cuts, extending throughout the nation, included elimination of an unknown number of bureaus and left skeleton staffs in some states. In South Dakota, for instance, UPI now has a single news reporter.
But a spokesman, David Wickenden, said UPI will remain a nationwide news-gathering organization. "UPI is going to maintain bureaus in every single state," Wickenden said. He said the Wire Service Guild was "fully aware" of the cuts; union officials could not be reached for comment.
Wickenden said the cutbacks were part of a reorganization plan that UPI executives had been working on for a couple of weeks but were unable to implement before deciding on Friday that the company had to file for reorganization under Chapter 11 of the bankruptcy laws.
UPI, $20 million in debt, was forced to file for bankruptcy after its largest creditor, Los Angeles-based Foothill Capital Corp., refused on Thursday to advance enough money to fund the current payroll.
It was the latest in a series of financial problems that have buffeted the 78-year-old news service, which has been losing money for the past 20 years.
Yesterday, UPI Chairman Luis Nogales said Foothill Capital, to which UPI owes more than $6 million, had agreed to provide financing "that will put in place a financial structure to make funds available to cover the paychecks" of UPI's employes "as well as the company's ongoing obligations."
"We are confident that the financing will be in place early in the new week," Nogales told UPI staffers yesterday. "There will be an announcement to let you know when paychecks can be deposited."
Foothill officials have declined to comment. But UPI, in its own news story about its problems, quoted unidentified management sources as saying that the finance company was displeased with the refusal of the Wire Service Guild, which represents about half of UPI's staff, to discuss additional concessions or layoffs aimed at cutting operating costs further.
Last summer, the union accepted a temporary 25 percent pay cut, and UPI employes currently are working at 85 percent of previous pay levels.
UPI's planned bankruptcy filing would enable the company to break its contract with the Wire Service Guild and unilaterally institute salary scales and work rules that management deems more favorable. Wickenden refused to speculate on whether this will happen.
The Chapter 11 rules also protect a company from lawsuits by creditors while it works out a reorganization of finances under court supervision.
Typically, such a reorganization would include paying creditors a fraction of what they are owed or issuing them stock or other securities in lieu of debt payments.
UPI officials have argued that the company has been turning a profit in recent months but that its long-time debts have constricted cash flow.
Nogales and other executives apparently hope that if they can rid the company of debt through a bankruptcy reorganization they can either make the company viable or attract a buyer.
It is not known when and where UPI will make its Chapter 11 filing. But the news service's story on its problems quoted company sources as saying the filing would be made Monday in Washington.