Reorganization Plan
Philadelphia Newspapers head to court as buyer, Union negotiate
Philadelphia Newspapers LLC will seek bankruptcy court approval for its reorganization plan while the group buying its Philadelphia Inquirer and Daily News dailies for $139 million continues contract talks with unions.
A group including the hedge fund Angelo Gordon & Co. and a unit of Credit Suisse Group AG won an auction for the newspapers in April. The buyers are still negotiating with the unions, Fred Hodara, an attorney for the group, said yesterday in an e-mail.
Hodara and Philadelphia Newspapers lawyer Lawrence G. McMichael said they expect the newspaper company to win the needed court approvals to exit bankruptcy within a few weeks after a hearing today in U.S. Bankruptcy Court in Philadelphia.
"The buyers will close," McMichael said in an interview. "But I think they will need time to get everything done."
U.S. Bankruptcy Judge Stephen Raslavich is scheduled to hear from union pension funds that oppose the plan, saying it would leave them with a $150 million deficit. The buyers and Philadelphia Newspapers said they'll ask the judge to overrule those objections and approve the plan.
The company's largest union, the Newspaper Guild, will meet with the buyers for another round of negotiations next month, Guild Executive Director Bill Ross said in an interview. The two sides are negotiating the size of concessions the union will make under a new contract, he said.
After approval, the buyers would have until Aug. 31 to close the sale and take control of the Inquirer and Daily News, McMichael said. The new holding company for the newspapers and the other assets being sold will be named Philadelphia Media Network Inc., according to court papers.
Ad sales drop
Philadelphia Newspapers filed for bankruptcy in February 2009, more than two years after Chief Executive Officer Brian Tierney led a buyout of the publisher. The filing, which listed assets and debt of as much as $500 million each, cited a decline in advertising revenue related to "drastically lower" car, real estate and retail sales throughout the U.S.
When the buyers won April's auction, they said they expected to close the deal by late June. McMichael said yesterday that the sale probably won’t be final until August.
"It would be a mess" if the buyers back out, he said.
Philadelphia Newspapers has been in touch with the second- place bidder, which is still interested in the company, McMichael said. That bid, of $130 million, was from a group led by billionaire Ronald Perelman’s MacAndrews & Forbes Holdings Inc. and includes Bruce Toll, vice chairman of Horsham, Pennsylvania-based homebuilder Toll Brothers Inc.
Union Funds
Union funds, including the Teamsters Pension Trust Fund of Philadelphia & Vicinity, objected to the plan June 18 in part because the buyers will escape liability for any pension losses, the funds said in court papers.
The Teamsters Pension claimed the lenders plan to cancel union contracts, including pension obligations, without negotiating with employees.
The sale can close before the buyers come to terms with the unions, McMichael said. After the current owners bought the company for $515 million in 2006, it took them more than six months to negotiate new union contracts, McMichael said.
Susan Murray, a lawyer for the Philadelphia chapter of the Newspaper Guild, didn’t return calls yesterday seeking comment.
Philadelphia Newspapers is one of at least seven metropolitan newspaper publishers to file for bankruptcy since 2008. That group includes the owner of the Los Angeles Times and Chicago Tribune and the publishers of the Orange County Register and the Minneapolis Star Tribune.
The Inquirer, founded in 1829, is the third-oldest daily newspaper in the U.S. and has won at least 18 Pulitzer Prizes. The Daily News was started in 1925. The two newspapers have had a common owner since 1969, when they were bought by Knight Newspapers Inc.
The case is In re Philadelphia Newspapers LLC, 09-11204, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Philadelphia).
(Published by Bloomberg - June 24, 2010)