The Dolan Co. to seek Chapter 11 bankruptcy protection

A publishing company that profited during the housing crisis by processing mortgage default documents said Thursday that it will reorganize under bankruptcy protection because of the burden of its own accumulated debt.

Existing shareholders are expected to be wiped out.

The Dolan Co. went public in 2007 and saw its stock price soar for a while. However, the end neared last winter after bank lenders pulled the plug and sold the debt to a distressed-debt investor and negotiations collapsed on a revival plan outside of bankruptcy.

Dolan plans to file a "prepackaged" Chapter 11 bankruptcy plan with the U.S. Bankruptcy Court in order to pursue a proposed financial restructuring that the company expects to complete within two months. Dolan is working on a plan with creditors that would reduce secured debt from about $170 million to $50 million.

CEO Jim Dolan, 65, the founder of the company, and Chief Operating Officer Scott Pollei have resigned.

Dolan, a onetime journalist and media-industry investment banker, built Dolan over 20 years into a multistate business through acquisitions of services that helped lenders and attorneys process residential mortgage defaults and court appeals and as a publisher of legal, legislative and business journals, including Finance and Commerce.

He was unavailable for comment on Thursday.

The stock price fell from about $3 per share last October to under $1 in November and closed Thursday at 2.5 cents.

In January, Kevin Nystrom, an outsider, was appointed chief restructuring officer, a signal that management was no longer calling the shots. That month the company's shares were de­listed from the New York Stock Exchange for failing to meet the exchange's minimum standards as the stock sank below a $1 per share.

"Jim made a company out of nothing, and I have nothing to say but good things about him," said Dan Carr, president of the Collaborative, on whose entrepreneur panels Jim Dolan appeared. "He could buy, roll up and integrate businesses and he had a gifted mind when it came to financing and running businesses across different states. I'm just not sure what happened to the company in recent years."

Essentially, the foreclosure processing business ran out of gas and got caught up in regulatory actions between the federal government and banks, and the publishing businesses struggled. Dolan discontinued some operations last year, resulting in big write-downs and losses.

The company lost $179 million, or $5.78 per share, on flat revenue of $117.5 million during the first nine months of 2013 and has yet to report full-year results.

Dolan's business information division operates in 19 markets, publishing business journals, court and commercial publications in print and through websites. Titles include Finance and Commerce, Legal Ledger, Minnesota Lawyer and Politics in Minnesota. Those publications will continue to operate as the company restructures, the company said.

The company is expected to get necessary votes from its secured creditors by the end of this week in order to file the Chapter 11 plan next week.

Given the "prepackaged" nature of the bankruptcy plan, the company expects to emerge from bankruptcy within two months. The Dolan Co. and DiscoverReady are expected to emerge from the bankruptcy as privately held companies.