Dorchester Publishing, plagued by financial troubles for years and having recently divested itself of its remaining editorial staff, appears to be marching towards an ignoble end after more than 40 years in business. In a twist worthy of Dorchester's tortured road to collapse, the publisher's owner is the one foreclosing, on a personal basis, against the company itself, and will collect the proceeds from the sale of at least some of its property--raising questions about whether any assets will remain to pay creditors.
On February 28, John Backe filed a notice of foreclosure after failing to collect on an outstanding $3.4 million loan to Dorchester Publishing. (The loan was first made in 2009 for $2.9 million and was increased in December 2010.) The Backe Group, Inc., which Backe founded, is the owner of Dorchester. The notice was part of a process under Article 9 of New York State Law, deemed by a firm handling the process to be "more efficient and less expensive" than a Chapter 11 bankruptcy reorganization.
The notice indicated Backe's intention to "foreclose its security interest in [Dorchester] and sell at public auction as a single unit," an auction that was held Thursday, March 8 at 2 PM, at the Great Neck, NY offices of law firm Garfunkel, Wild.
Burton Weston, the lawyer handling the auction, told us that Garfunkel, Wild received one advance bid from FAA Investors on the entirety of Dorchester Media, including the magazines division (including True Confessions and True Story), all domestic and foreign copyrights and intellectual property, and all computer equipment. (A search did not reveal a company by that name but did turn up "FAA Investments", a Florida-based entity that has some familiarity with foreclosures.) Weston said prior to the auction he "did not anticipate anyone attending," and late Thursday afternoon Norton Lazarus of OEM Capital, the investment banking firm handling the sale, confirmed FAA Investments, a company that did not wish to disclose any further information about itself, as the sole and winning bidder. He said they would enter into an agreement with Dorchester Media on Friday.
Importantly, however, Lazarus clarified a somewhat confusing issue about the notice of foreclosure, saying that it did not apply to to book publisher Dorchester Publishing itself - a separate auction of assets is planned for later. "We are on a mission to find buyers for the book titles of Dorchester Publishing, and we have a number of people interested," so much so that Lazarus says the company is "close to doing a deal."
They can't, however, "start the clock ticking" on a possible auction unless there's a stalking horse bid in place, and under New York State Law, this type of sale cannot be held until a minimum of 20 days after a lien search but no less than 50 days after the search is completed. The lien search on the Publishing unit is complete, but, Lazarus said, negotiations "became much more convoluted and complex" because of the number of rights and royalty issues at play.
Lazarus reiterated the claim Dorchester's inability to pay authors or to suppress rights they no longer had were due to the failures of third parties, namely its distribution partner (which owed money to Dorchester). "Because Dorchester got into a very bad situation with authors, upset people, everyone was super-sensitive, with lots of shouting and accusations. It happens all the time, even with major publishers, with reversion, where you put in a request with retailers to suppress and there's a time delay." But Lazarus added Dorchester still has "sufficient staff" to handle the reversion issues, even though he declined on repeated occasions to explain exactly what he meant by "sufficient."
Last week agent Kristin Nelson reported that she got word "the doors were locked, lights out, and the phones disconnected at Dorchester's [offices.]" (Nelson also discovered the notice of foreclosure early Thursday.) Former vp marketing Tim DeYoung said on Twitter that the office had been closed and "people were working from home," and a message on Dorchester's Facebook page said authors could "contact them by email" as "we are waiting for our phones to resume...at our new Park Avenue Offices." (Lazarus said there were "various attempts" to find additional office space, but added he expects a sale to have been completed before the new location was made public. OEM Capital's offices also happen to be located on Park Avenue.) Author Brian Keene added that two authors confirmed to him they were proceeding with legal action against the publishing company.