Judge OKs $139M court sale of Philly newspapers
Thursday, September 30, 2010; 5:12 PM
PHILADELPHIA -- A judge quietly approved the bankruptcy sale of Philadelphia's two largest newspapers to creditors on Thursday, nearly closing a bitter and often chaotic 20-month battle for control of the company.
The sale of The Philadelphia Inquirer and Philadelphia Daily News is valued at about $139 million, including $105 million cash and the iconic newspaper building.
The senior lenders are essentially paying themselves. All of the approximately 30 banks and hedge funds holding the company's secured debt will now retain ownership shares, including the hedge fund Angelo, Gordon & Co., which has stakes in newspapers in Los Angeles, Chicago, Minneapolis and other U.S. cities.
Creditors plan to close the sale by Oct. 8. They could close sooner if they can negotiate contract terms with holdout drivers, who derailed the scheduled sale last month.
"We look forward to operating the company out of bankruptcy, revitalizing the Inquirer and Daily News, and building the most successful regional portal in the country," said incoming Publisher Greg Osberg, referencing the company's Philly.com website.
The confirmation hearing had an air of anticlimax, and exhaustion, after months of high-stakes legal maneuvering and two auctions to determine the next owner. Creditors won them both, outbidding 93-year-old business mogul Raymond Perelman and others. Perelman helped push the bidding past $100 million cash both in April and, when that deal fell through, in the second auction on Sept. 23.
But the philanthropic city booster said he could not rationally pay more for the newspaper company, given the industry uncertainty.
A group of local investors led by public relations executive Brian Tierney and luxury homebuilder Bruce Toll had borrowed heavily to finance their $515 million purchase of the company in 2006. They filed for bankruptcy three years later.
Months of emotionally charged showdowns with creditors ensued, as the two sides battled over auction rules, union support, Tierney's "Keep it Local" campaign and slights real and perceived.
But the creditors outlasted the challenges. And the always-colorful Tierney has moved on, spending much of the past few months in Europe, working on his next venture.
The creditors have dubbed their company Philadelphia Media Network, and plan to cut costs by 13 percent across the board. Newsroom employees have agreed to 6 percent pay cuts that include two-week furloughs, but will be spared layoffs for at least a year.
Osberg hopes to re-energize the website and better coordinate print and online operations. The Philly.com site is currently run by about 20 people who work in a different building. That setup will end, he said.
The drivers have rejected contract offers that switch company pension contributions from a multi-employer Teamsters fund with defined benefits to individual 401(k) accounts. Negotiations continued Thursday to try to broker a deal and avert any potential strike.
"I'm hopeful that it's going to happen. We're back on track today," Osberg said. Some tense words exchanged this week between the mailers union and the new owners have also been smoothed over, he said.
John Laigaie, president of the drivers union, did not return a call for comment.
The newspapers have 2,000 full-time and 2,500 part-time employees, most of them unionized workers.