Creditors have forced local media mogul Harry J. Pappas into a personal bankruptcy filing -- an unusual move that threatens his effort to save Visalia-based Pappas Telecasting Companies from financial disaster.
Filed Monday in the U.S. Bankruptcy Court for the District of Delaware under Chapter 7 of the Bankruptcy Code, the action could lead a judge to order the sale of personal property to pay off debt.
It follows on the heels of a bankruptcy petition filed Friday by Pappas Telecasting, which is seeking protection under Chapter 11 while coming up with a reorganization plan.
Lenders Fortress Credit Opportunities, Ableco Finance LLC and Silver Oak Capital LLC, saying Pappas personally owes them $15 million, are asking in their Chapter 7 filing for an interim trustee to protect their interests while the matter can be sorted out.
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Hagop Bedoyan, a Fresno attorney with the firm of Caswell Bell & Hillison, said he has filed hundreds of bankruptcy petitions in 20 years practicing law -- but only one involuntary petition.
"Given the magnitude of Mr. Pappas' purported personal guarantees, the petitioning lenders apparently believe that his personal assets must be secured in order for them to eventually be repaid," said Bedoyan, whose firm is not involved with the bankruptcy filings.
But, he added, "just because creditors petition to have Mr. Pappas declared bankrupt, that doesn't mean that Mr. Pappas doesn't have the right to contest the involuntary petition."
The Visalia-based media company owns 30 television and two radio stations across the United States. The company began when Pappas put KMPH on the air in 1971. As one of the first Fox Network affiliates, Pappas was influential especially in regards to the development of children's programming by the network.
Pappas Telecasting officials had no comment apart from a statement from vice president and special counsel Steven E. Alfieris, who said, "The matter has been referred to counsel. Appropriate steps will be taken."
In their Chapter 7 filing, creditors say Pappas and his wife, Stella, personally guaranteed $30 million of a $284 million loan that Pappas Telecasting secured in March 2006.
Creditors said the $284 million loan was based on an agreement that Pappas would sell enough of his television stations to repay $100 million of the debt. The rest would be paid on what the filing calls "a reasonable schedule."
Pappas announced in December it was putting most of its stations up for sale, but no deal has been made. Also that month, Pappas Telecasting announced plans to streamline the company and fire a dozen corporate managers.
According to the Chapter 11 filing, Pappas Telecasting owes more than $5.8 million to its top 20 creditors. The biggest sum owed, $1.4 million, is to Fox Broadcasting. KMPH is a Fox affiliate. The company's estimated assets, as per the document, total between $100 million and $500 million.
After the Chapter 11 filing, Pappas Telecasting officials guaranteed viewers would see no disruption. It is unclear how the Chapter 7 filing will affect the Pappas stations.