NEW YORK — Another major chunk of the empire assembled by the late publisher Robert Maxwell plunged into bankruptcy proceedings Monday when Maxwell Communication Corp.--parent of the giant U.S. book publisher Macmillan--sought court protection from creditors.
The London-based company said it decided to file the Chapter 11 bankruptcy petition in New York, in part, because the bulk of its revenue and operating profit is generated in the United States.
Macmillan Publishing Co.'s historic Scribner's imprint publishes the works of F. Scott Fitzgerald and Ernest Hemingway. The firm's textbook publishing joint venture with McGraw-Hill has annual sales of $577 million, making it the nation's largest publisher of elementary and high school textbooks. Other U.S. holdings include Collier's Encyclopedia and the Official Airline Guides.
Bankruptcy experts said the court filing could accelerate offers for Maxwell units from potential buyers, who have been holding back from making bids because of the legal uncertainties surrounding the company.
Maxwell Communication stressed that the bankruptcy filing did not include the units themselves, however; that means that Macmillan and the other subsidiaries will continue to operate as usual while the parent firm reorganizes.
The company said it made the bankruptcy filing "to obtain the time and protection necessary to develop and effect a reorganization of its financial structure."
Peter Laister, chairman of Maxwell Communication, said: "MCC's problems relate principally to the burden of debt in MCC itself and do not diminish the underlying strengths of our world-class businesses. . . . We look forward to an early discussion with MCC's creditors in order to bring about an orderly resolution to this situation."
Two Maxwell family-owned holding companies that have a controlling stake in Maxwell Communication are under administration--the British equivalent of bankruptcy proceedings--in London amid allegations of fraud, self-dealing and plunder of up to $1.4 billion in pension funds.
In addition, the Maxwell-owned New York Daily News entered Chapter 11 two weeks ago; its survival depends upon its creditors and unions coming up with a reorganization plan before the tabloid runs out of cash.
International bankruptcy experts said Maxwell Communication's U.S. court filing could provide a more convenient arena for straightening out the company's tangled finances than British bankruptcy proceedings.
"Our Chapter 11 is more sophisticated, and it has certainly been used far more times in major bankruptcies than the newer British statute," said Alan Miller, a partner at Weil, Gotshal & Manges, New York's leading bankruptcy firm.
Given the rash of claims against Maxwell Communication--including allegations that hundreds of millions of dollars were stolen from its British pension funds--and charges of self-dealing among Maxwell-owned companies, nothing short of a bankruptcy proceeding would have allowed the company to sell off its assets and reorganize, Miller said. The company also has about $2.7 billion in debt.
"Say somebody wanted to buy Macmillan," Miller said. "The only way a buyer could assure himself of a clean title now is to have the transaction blessed by a bankruptcy court. In the United States, that's good as gold."
Analysts and industry sources said potential buyers for all or part of the company include Kohlberg Kravis Roberts & Co.'s K-III Holdings Inc. partnership, owner of New York and other magazines; Paramount Communications Inc.; German media giant Bertelsmann, and Reed International, a British publishing house.
In other Maxwell-related developments Monday:
* Assistant U.S. Trustee Arthur Gonzales appointed a 13-member creditors committee in the Daily News reorganization case that included representatives of four of the newspaper's unions, assuring them a major role in attempts to reshape the business.
* Daily News Chief Financial Officer Larry L. Bloom said cash on hand had dwindled to $6 million from $8 million at the time of the paper's court filing. But he projected that the sum would climb back to $8 million by Jan. 1.
* Two U.S. House leaders asked the General Accounting Office, the investigative arm of Congress, to include the collapse of Maxwell's media empire in a probe of private stock placements.