James Dolan has resigned from the Minneapolis-based company that bears his name while the business, in an effort to reorganize and reduce debt, announced plans to file for Chapter 11 bankruptcy protection.
The Dolan Company, which is headquartered in Minneapolis, provides an array of business information and professional services to the legal, financial, and real estate industries, and it owns the Finance & Commerce newspaper, among other publications.
The company was formed in 1992 by Cherry Tree Investments and James Dolan—a protégé of publishing magnate Rupert Murdoch, the founder of News Corporation—and grew to become one of Minnesota's largest public companies. (Learn more about James Dolan and the evolution of the company here.)
But the company has struggled with mounting losses stemming largely from its mortgage foreclosure processing businesses. And it said Thursday that James Dolan has stepped down from his role as CEO, and Scott Pollei, the company’s longtime chief operating officer has resigned as well. James Dolan on Thursday declined to comment on his resignation, deferring questions to the company, which said the resignations are “concurrent with the planned chapter 11 filing.”
Going forward, Chief Financial Officer Vicki Duncomb and General Counsel Renee Jackson will remain in their leadership positions and will work with Kevin Nystrom, who was appointed “chief restructuring officer” in January, to oversee the company's operations.
The Reorganization Plan
Dolan’s official bankruptcy plan has not been made public, as it is not expected to be filed until later this week, but the company provided some details on Thursday.
The reorganization plan applies to Dolan and certain subsidiaries, but Dolan’s "e-discovery" business, DiscoverReady, LLC, is not filing for chapter 11 and will not be affected by the reorganization process, the company said.
Dolan said it has “agreed to a comprehensive balance-sheet restructuring with its secured lenders that, among other things, will allow the company to continue honoring obligations of its employees, customers, and vendors in the ordinary course of business.”
Shareholders will not be compensated as a part of the reorganization plan, as the company said that both common and preferred shares are being “canceled.” Shares of Dolan’s stock were recently delisted from the New York Stock Exchange and had moved to an "over-the-counter exchange" after their price plummeted 90 percent in just three months.
Following its reorganization, Dolan will emerge as a private company.
Dolan said that its reorganization plan will allow it cut secured debt obligations by roughly 70 percent—from $170 million to about $50 million. The plan also calls for refinancing Dolan’s DiscoverReady business with a $10 million “unfunded secured revolving facility.”
Dolan has downsized by divesting some business units, and an analyst told Twin Cities Business last year that the sales would help Dolan focus on its more successful e-discovery business, which handles document review and discovery for legal professionals.
Chief Restructuring Officer Nystrom said in a Thursday statement that Dolan “remains well-positioned in its core markets.”
“This reorganization step is necessary to unlock these current businesses from the weight of debt principally associated with its previous mortgage foreclosure processing businesses,” Nystrom said. “The company and its lenders are committed to the customers, employees, and vendors and want to secure a bright future through this process.”
Dolan’s mounting debt issues were made increasingly apparent in recent months. For example, last fall, Dolan disclosed that changes to its credit arrangement called for the company to come up with $50 million in cash to pay down its outstanding loans. It had also amended a credit deal with Miami-based investment firm Bayside Capital.
For its third quarter, the company reported a net loss of $27.5 million, or $0.91 per share, compared to a net loss of $103.5 million, or $3.41 per share, during the same period the prior year. Revenue, meanwhile, totaled $35.5 million, down from $44.7 million.