The Dolan Co. will file for Chapter 11 reorganization

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By Tom Linthicum
Special to the Wisconsin Law Journal

The Dolan Co. (OTC: DOLN), the Minneapolis-based owner of the Wisconsin Law Journal, will seek bankruptcy protection under Chapter 11 next week in a process that Dolan officials say should result in a speedy exit from bankruptcy and smooth continued operation of the company.

Under the process, known as a “pre-packaged bankruptcy,” Dolan said its vendors and other unsecured creditors are expected to be paid in full. Likewise, the company expects to continue providing its products and services across the country, both to its legal services customers and in the 19 local publishing markets it serves. Employees will continue to be paid as usual, the company said in a statement.

The voluntary bankruptcy petitions are expected to be filed in the U.S. Bankruptcy Court for the District of Delaware. The subsidiaries of The Dolan Co. will be parties to these petitions, with the exception of its e-discovery business, DiscoverReady LLC, which will continue to operate as usual.

“The company 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,” said Kevin Nystrom, who was named Dolan’s chief restructuring officer in January.

The company said it is soliciting approval of the terms of the Chapter 11 reorganization plan from its secured lenders and that process should be complete at the end of this week.

According to Dolan officials, the plan would allow the company to reorganize its capital structure, reducing its projected secured debt from approximately $170 million to $50 million. The restructuring is being accomplished by exchanging existing bank debt for equity ownership in the company.

Dolan said its secured lenders will take ownership of the company once the Chapter 11 process is final.

Given the typical speed of a “pre-packaged” bankruptcy, in which the secured lenders have already agreed to the terms, Dolan Co. officials expect the bankruptcy court to approve its Chapter 11 reorganization plan approximately 35 days after the initial filing. The company would emerge from bankruptcy shortly thereafter as a privately held entity, officials said.

The largest owner is expected to be Bayside Capital, Inc., a subsidiary of HIG Capital, a $15 billion private equity fund that regularly takes ownership interests in businesses.

James P. Dolan, founder of The Dolan Co. and its president, chief executive officer and chairman of the board since it began in 1992, is resigning and will not be part of the restructured company. Scott J. Pollei, executive vice president and chief operating officer, is also departing. Dolan said he has formed a new company called Dolan Ventures LLC.

Chief Financial Officer Vicki Duncomb and General Counsel Renee Jackson will remain and assist Nystrom in managing The Dolan Co.

Founded in 1992 and privately owned for 15 years, The Dolan Co. went public in 2007 at an offering price of $14.50 per share and closed briefly above $28 before the end of that year. On Jan. 29 of this year, the New York Stock Exchange suspended trading in Dolan’s common and preferred stock after it fell below $1 a share for 30 trading days in a row with no immediate sign of recovery.

Now listed over the counter, Dolan stock closed Wednesday at 15 cents a share.

Dolan’s lenders are providing a $10 million debtor-in-possession loan to support the cash needs of the company and DiscoverReady through the reorganization process. DiscoverReady will be a separate company upon completion of the restructuring without funded debt and with access to a $10 million credit facility. Dolan is expected to emerge with $50 million of funded debt.

According to Dolan’s most recent earnings release, for the third quarter of 2013, the company posted revenues of $35.4 million in the quarter and projected revenues for the full year of $150 million to $154 million.

The company has been selling off business units as the credit squeeze tightened and the mortgage market underwent turmoil. National Default Exchange, or NDeX, which provided mortgage default processing services to law firms, was at one time the company’s largest operating unit. Now it is one of the smallest.

The Dolan Co. provides professional services and business information to the legal, financial and real estate sectors.

Its Professional Services Division provides specialized outsourced services to the legal profession primarily through subsidiaries DiscoverReady LLC and Counsel Press. Counsel Press is the nation’s largest provider of appellate services to the legal community.

DiscoverReady LLC provides outsourced discovery management and document review services to major companies and law firms. NDeX assists law firms with mortgage default work in Minnesota and another unit of the division, Assure360, also provides support to law firms in the default sector.

The company’s Business Information Division publishes business journals, court and commercial media and other highly focused information products and services, operates websites and produces events for targeted legal and professional audiences.