Black Press set for sale after striking deals with US feds, international hackers

The largest roadblock obstructing the sale of troubled local newspaper chain Black Press has been resolved—but not before the astonishing revelation that the beleaguered company paid a six-figure ransom in January to get its computer servers back from a group of international cybercriminals.

This week, the Canadian newspaper company announced it had struck a $2 million deal with an American federal agency to resolve $45 million in outstanding pension obligations and clear the way for its sale.

The company’s legal filings also revealed that just days before it filed for creditor protection, Black Press’s Hawaii subsidiary was hacked by cyber criminals. Two weeks later, after the loss of hundreds of thousands of dollars, the chain paid the extorters a six-figure ransom sum to unlock its servers.

The sale

Two months after filing for creditor protection, Black Press’s lenders now look set to take ownership of the company.

The Current has previously written about the fateful Ohio newspaper purchase that landed the company with more debt than it could pay back, the ‘stalking horse’ bid by its lenders and a US newspaper company to take over the publisher, and the objection from a United States federal agency hoping to stop the company from walking away from $45 million in pension-related debts.

Those issues will likely reach their climax next week in a Vancouver courtroom where Black Press will ask a judge to approve its sale to its former lenders and Carpenter Newsmedia LLC, a little-known publisher of newspapers in the American south. If approved, the sale would be completed within a month.

From the start of the process, Black Press’s lenders had angled to buy the newspaper chain and use its cashflow to get back the money they are owed—while extracting a 10% interest rate. The original plan by the company’s lenders would also see Black Press shed itself of any obligations to repay millions owed to the Pension Benefit Guaranty Corporation, a US government entity that had taken over administration of $45 million in pension debts dating back to the company’s disastrous ownership of an Akron, Ohio, newspaper.

PBGC wanted to prevent Black Press from walking away the entirety of the sum it owed, however, and was able to convince a US court that final say over the future of Black Press’s American holdings should be decided south of the border.

That ruling prompted PBGC and Black Press to re-open negotiations, according to new filings that reveal a compromise has now been reached.

Black Press will pay PBGC $2 million if Canadian authorities rubber-stamp the company’s sale. In exchange, PBGC says it won’t try to block the sale of Black Press in US court and will also give up its claims to the rest of Black Press’s pension obligations. (PBGC—which exists to ensure workers get paid their pensioners when their companies struggle or collapse—will itself end up paying workers.)

Such an agreement with PBGC would resolve the biggest hurdle and satisfy the most powerful potential opponent to the sale of Black Press. If approved by the Canadian judge, it would pave the way for the newspaper chain’s assets on both sides of the US-Canada border to be turned over to its creditors and Carpenter.

The extortion

But PBGC hasn’t been the only thorn in Black Press’s side in recent months. The court filings released this week reveal that as Black Press prepared to officially file for creditor protection in January, it was also being extorted by cyber criminals.

(Presumably the criminals were unaware that they were targeting an almost-bankrupt company.)

On Jan. 10, just days before Black Press filed for bankruptcy, servers used by its Hawaii subsidiary were encrypted by the Akira Ransomware Group.

The servers compromised Black Press’s ability to issue invoices to advertisers and subscribers, costing it about $200,000 each day in desperately needed cashflow.

Akira demanded $4 million in US dollars to go away. Meanwhile, Black Press called in the FBI; the US Department of Homeland Security also “became involved,” according to the filings.

Black Press also hired a cyber security company to help with the incident. Eventually, the $4 million ransom was negotiated down to $150,000. Two weeks after the criminals had seized Black Press Hawaii’s servers, the company—on the advice of its consultant and with the approval of its creditor protection monitors—paid the ransom to Akira in bitcoin through a platform that “provides cryptocurrency ransomware settlement services.”

Investigations also revealed that the same vulnerabilities that allowed Akira to seize the servers existed elsewhere in the company’s information systems. The full cost of the incident is now estimated to be between US$300,000 and US$750,000

The jet

Finally, the new court filings also reveal that even as it struggled for cash and cut back staff, Black Press owned a corporate jet through a company incorporated in Oregon solely for the purpose of owning the aircraft. (Although the office of the jet company’s registered office was located in an Oregon industrial park, mailed notices were to be sent to Victoria—where Black Press’s founder David Black lived.) The jet was only sold “in and around” 2023, years after the company had declared itself unable to pay back its pension obligations and scaled back staffing in the Fraser Valley and across Western Canada.

What comes next

If the sale goes through, it means new owners will take control of dozens of community newspapers across British Columbia, along with others in northern Canada, Alberta, Alaska, Hawaii, and Washington State. The owners are lenders and Carpenter Newsmedia LLC. The companies have promised that the sale would allow the company’s publications to “continue to provide by far the best local Canadian and American news coverage in our markets.” But they also plan to “further cut costs” to improve the company’s bottom line and long-term sustainability.