Crime News Web Site to File for Bankruptcy Protection By FELICITY BARRINGER
APB Online, operator of a criminal justice news Web site that recently foundered, plans to file for protection for creditors under Chapter 11 of the Federal Bankruptcy Code. Last month, ABP Online laid off the staff and scrambled to find private investors to inject new capital into the debt-ridden company.
The bankruptcy filing, which the executives of APBnews.com said they would announce as early as Wednesday, is designed to provide a little more breathing space for the site, according to its chairman and chief executive, Marshall Davidson. At the moment, APBnews.com has rehired about two dozen staff members and is updating the site. This week, it featured a report from Sacramento about illegal fireworks.
But the enterprise still has $7 million in debts. Mr. Davidson and Mark Sauter, the site's chief operating officer, said in a telephone interview that the terms of Chapter 11 bankruptcy, which sets up formal lists of creditors and provides for negotiation of repayment schedules, could help them attract reticent investors by providing assurances that new capital would not simply be funneled into debt repayment, but would insure the site's viability.
The executives' current plea to potential investors, including large media companies, is that they can provide the most popular services of the site, like its local crime statistics, while spending far less for staff and gathering news.
"Our cash-burn rate and projected revenues are under $10 million for the next 12 months," Mr. Davidson said in a telephone interview. "Under $10 million keeps us operating. A total of $15 million breaks us even."
The site's original, more expensive ambitions, he said, matched the demands of private equity investors in the summer of 1998, when APBnews.com mustered its first financing, selling a 40 percent stake of the business for $3 million. A year later, he said, it was turning away investors willing to buy in at a much higher premium.
That was then. Giving his version of his company's brief, roller-coaster history in the private equity markets, Mr. Davidson said "if the capital markets would support a more rapid" -- and expensive -- "build-out and thus the value of your company is greater earlier, then that's what you would do."
But now, he added, "If the cap markets want to support a lower-cost build-out and accept a lower valuation, then you'll do that. The capital markets really made that change in March and April."
Sal Muoio, the president of S. Muoio & Company and an early investor in APBnews.com ($100,000), said that the Chapter 11 strategy "makes sense, for now."
He added, "I think it's better than selling the desks. They've got good people, and they've built a terrific news organization -- they obviously lost sight of what happens in financial markets."
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