Creditors miss deadline to buy Philly newspapers in $139M bankruptcy sale; cite labor strife

Creditors miss deadline to buy Philly newspapers

PHILADELPHIA — Philadelphia’s two major newspapers may soon go up for auction again after creditors, citing labor strife, failed to close on their $139 million purchase by Tuesday’s deadline.

Lawyers gathered in a bankruptcy judge’s chambers before a scheduled 2 p.m. hearing on the sale of the company that operates The Philadelphia Inquirer and Philadelphia Daily News.

“The deal did not close. The asset purchase agreement has expired,” company lawyer Larry McMichael told The Associated Press after the noon deadline. “Exactly what’s going to happen is still up in the air.”

The company nonetheless has enough money to fund normal operations and continue publishing the newspapers until a sale is finalized, he said.

Teamsters drivers blamed for holding up the sale picketed outside the courthouse Tuesday, and loudly derided Gov. Ed Rendell for questioning their rejection of the creditors’ contract. All 14 other bargaining units came to terms with the prospective owners.

The drivers belong to Teamsters Local 628, whose leaders say they had agreed to the 13 percent cost-savings sought “down to the penny.”

But they want pension contributions steered to a large Teamsters defined-benefit plan, while creditors insist the money go to a local defined-contribution plan or individual 401(k) accounts.

A group of local investors paid $515 million in 2006 to buy the media company, which they dubbed Philadelphia Media Holdings. However, the industry soon soured and they owed creditors nearly $400 million when they filed for bankruptcy three years later.

Creditors won the marathon April bankruptcy auction, outbidding local philanthropists led by Philadelphia business mogul Raymond Perelman who helped push the price far past expectations.

Perelman, who recently toured the Inquirer newsroom, was in court with his lawyer for Tuesday afternoon’s hearing. He declined to comment on whether he would mount another bid if a second auction is held.

Former Publisher and Chief Executive Officer Brian Tierney will not return to the helm, but would again help recruit potential buyers in the event of a second auction, McMichael said.

“Brian will be actively involved in trying to get bidders to the table. Brian will not be a bidder,” McMichael said.

Tierney, who left as CEO in late May, is a former public relations executive who won the support of Teamsters and fought vigorously throughout the bankruptcy to keep the newspapers in local hands.

The creditors’ management team, Chief Operating Officer Bob Hall and Publisher Greg Osberg, had warned Monday that the newspapers may be shut down for a time if the drivers hold out. They also vowed that creditors would again win any future auction. They declined to comment Tuesday.

The creditors’ group is led by hedge funds Alden Global Capitol, Angelo Gordon & Co. and other financial institutions.