Court sale of Philly newspapers nears collapse; drivers’ pensions hold up takeover by lenders

Court sale of Philly newspapers nears collapse

PHILADELPHIA — Philadelphia’s two largest newspapers could go on the auction block — again — as lenders struggle to complete their $139 million purchase by Tuesday’s deadline.

The bankruptcy sale of The Philadelphia Inquirer and Philadelphia Daily News appears near collapse over the drivers’ pension plan.

The lenders have until noon Eastern time to pay up on their winning bid for the company and take it out of bankruptcy after 18 tumultuous months.

But they say they won’t close without signed labor contracts from all 15 unions, and holdout drivers are balking at demands to leave their Teamsters’ pension plan.

That could set the stage for another bankruptcy auction.

Local investors paid $515 million for the company in 2006, calling it Philadelphia Media Holdings. The company sought bankruptcy protection in February 2009 and it was put up for auction in April.

The investors’ lawyer, Larry McMichael, said the company has enough money to operate until a second sale can be held, challenging statements made a day earlier by the creditors’ management team, Publisher Greg Osberg and Chief Operating Officer Bob Hall.

“If the lenders do not close, we will be moving forward with an alternative plan to get out of bankruptcy, and people will be getting their Inquirer in an orderly fashion,” McMichael said.

Chief U.S. Bankruptcy Judge Stephen Raslavich has set a 2 p.m. hearing to assess the status of the sale.

Hall and Osberg had warned that the newspapers may be shut down for a time if the drivers hold out. And they vowed that creditors will win a second auction if it comes to that.

“We are not going away,” Osberg said. “We are planning to own the company.”

McMichael said the company would exit bankruptcy “gracefully, one way or the other.”

The drivers’ union, Teamsters Local 628, blamed the buyers for putting Tuesday’s sale at risk.

“There is no reason that the buyers cannot go to closing as scheduled and continue to pay for the existing pension benefits,” the union said in a statement Monday. “Instead of bargaining in good faith, the buyers are now trying to coerce our members to give up their pensions by using threats.”

It’s not clear if former Chief Executive Officer Brian Tierney would return to the helm until a second sale can be organized.

Tierney, who left as CEO in late May, is a former public relations executive who fought vigorously to keep the newspapers in local hands. He put together a group of investors and Philadelphia-area philanthropists, including Revlon chairman Ronald Perelman and his father, Raymond, who pushed bidding well past $100 million at the two-day auction.

But creditors outlasted them.

Raymond Perelman toured the Inquirer newsroom in the past month, raising speculation that the two sides could be poised for another showdown.

Calls to Hall and Osberg were not immediately returned Tuesday.

The creditors’ group is led by hedge funds Alden Global Capitol, Angelo Gordon & Co. and other financial institutions. In negotiations with other unions, they have sought to cut costs by 13 percent across the board. The editorial unit ratified a contract that includes wage cuts and furloughs equivalent to a 6 percent pay cut.