Lenders win 2nd auction for Philly Inquirer, Daily News with $105M cash bid, topping Perelman

By Maryclaire Dale, AP
Thursday, September 23, 2010

Lenders win Philly papers auction with $105M bid

PHILADELPHIA — Secured lenders again won a bankruptcy auction Thursday for Philadelphia’s two largest newspapers with a $105 million cash bid.

Their offer topped an $85 million bid from local philanthropist Raymond Perelman for The Philadelphia Inquirer and Philadelphia Daily News.

Creditors plan to cut costs by 13 percent across the board, but have pledged to continue publishing both newspapers and hold off on any newsroom layoffs for at least one year.

The acrimonious 19-month bankruptcy has been a roller-coaster ride for employees, readers and advertisers, incoming Publisher Greg Osberg said.

“We are hoping we’ve lifted a cloud,” said Osberg, who said the turmoil has been especially difficult for the company’s several thousand employees. “They’ve been extremely resilient, extremely patient, but I think they’re eager to move forward.”

Osberg vowed immediate improvements to the newspapers and a more robust online presence on the Philly.com website.

The creditors group includes the hedge funds Alden Capital and Angelo Gordon, the latter of which now owns stakes in newspapers in Los Angeles, Chicago, Minneapolis and several other U.S. cities.

The group said it will honor contracts forged in recent months with most of the 15 employee unions in Philadelphia. But creditors’ lawyer Fred Hodara said that “all options are on the open” to the buyers if they cannot make a deal with holdout delivery drivers who refuse to sign because of a dispute over pension issues.

The creditors, known as PN Purchasers, plan to end contributions to their Teamsters pension fund and switch the drivers to individual 401k plans. The drivers have balked.

Other unions have negotiated various ways to reach the desired cost savings. Newsroom employees have agreed to a 2 percent wage cut and 10-day furlough that amounts to a 6 percent drop in pay for the next three years.

The 93-year-old Perelman, a city native who made his money buying and selling businesses, said this week that he hoped to preserve the integrity of the newspapers he cherishes.

Perelman, whose opening bid was $50 million, said it did not make financial sense for him to push his bid any higher. He wished the new owners well.

“I feel good that we’re out of bankruptcy,” said outgoing Publisher Brian Tierney, who led a group of local investors who borrowed heavily to buy the company in 2006 for $515 million. The company filed for bankruptcy in February 2009. Tierney fought tenaciously with creditors during the prolonged bankruptcy process.

“There’s been a certain amount of rawness over the last couple of years, especially the last couple of months. We have to focus on healing,” he said Thursday.

Creditors had also won a spring auction for the company with a similar bid of $105 million cash plus the newspaper building, valued at about $30 million, and a few million in costs. But they walked away from that $139 million deal over the stalemate with the drivers’ union.

Chief U.S. District Judge Stephen Raslavich wants Thursday’s sale to close by mid-October. The auction is part of the Tierney group’s Chapter 11 reorganization plan. A plan confirmation hearing is set for Sept. 30.

will not be displayed