Philadelphia Inquirer Buyer Said to Cancel Purchase, Forcing New Auction

Bloomberg

 

A deal to sell the Philadelphia Inquirer newspaper fell apart, forcing the publisher operating under bankruptcy protection to consider putting itself up for auction, a company attorney said today.

Philadelphia Newspapers LLC, the company that controls the Inquirer and the Philadelphia Daily News, is negotiating with the group of lenders who backed out of a contract to buy the newspapers today, Lawrence G. McMichael, a lawyer for the company, said in an interview. The company can continue to operate because it has enough cash and is approaching the busiest time for advertising sales in the newspaper industry, McMichael said.

“I don’t know what we’re going to do,” said McMichael, with the law firm Dilworth Paxson LLP. Fred Hodara, an attorney for the lenders, declined to comment.

Under the company’s plan to exit bankruptcy, a group of the newspapers’ lenders, including hedge fund Angelo Gordon & Co. and a unit of Credit Suisse Group AG, had until noon today to complete the purchase of the company.

The sale collapsed after members of the Teamsters union refused to agree to change their pension plan, a person familiar with the standoff said today. Under the contract to buy the newspapers, the lenders had the option to back out if they failed to win support from all of the unions.

Frank Sabatino, a lawyer for the Teamster Pension Trust Fund of Philadelphia & Vicinity, didn’t immediately return a call for comment.

‘No Worries’

Philadelphia Newspapers had planned to file court papers this afternoon seeking a new auction, McMichael said. Those plans are on hold while the company talks to the lenders and the lenders talk to the Teamsters, he said.

“There is no reason for panic by anyone,” McMichael said. “There are no worries about shutting down.”

The newspaper company filed for bankruptcy in February 2009, blaming the recession and a slowdown in advertising.

Pa. Newspapers' Layoff Notice Called 'Procedural'

Associated Press

 

PHILADELPHIA — Employees of Philadelphia's two major newspapers have been sent a letter warning of possible layoffs, but the lenders who won the newspapers at a bankruptcy auction last month say the notice is "procedural" and no such action is planned.

The letters, sent Friday on letterhead of The Philadelphia Inquirer and Philadelphia Daily News, say the new owners "will continue as the employer of all employees" but also note that the letter would serve as notice under a federal law that requires employers to give 60 days' notice in the event of mass layoffs.

"The letter is a procedural letter. It was agreed they would send it out up at the auction in New York," said Robert Hall, named chief operating officer by the new owners. "The old company goes out of business that day and we start anew."

"Our intention is still exactly the same as it was before," Hall said. "There will be no massive layoffs when we take over the company."

Creditors last month won a frenzied bankruptcy auction for the two newspapers and their website over a local group's bid. Greg Osberg, who has been named publisher and chief executive officer, has said he expects the sale to close in late May and hopes to complete contracts with the newspapers' unions by the end of June.

In a note accompanying the letters, outgoing publisher Brian Tierney said he was sending them "with a heavy heart, but at the direction of the prospective owners."

"Issuing this kind of ... notice does not happen in every sale," Tierney said. Such notices weren't issued when the previous owner, Philadelphia Media Holdings LLC, bought the newspapers nearly four years ago, he said.

Dan Gross, a Daily News columnist and president of the union that represents newsroom and advertising employees, said he had been assured that no job cuts are planned at the newspapers, which have about 4,500 full-time and part-time workers.

"They reiterated their commitment to offering employment to all current employees," Gross said.

Gov. Ed Rendell said a company lawyer had given him similar assurances and told him the letters were required because of "an entity change."

Rendell said he would have no problem if there were no layoffs or unilateral reductions in wages and benefits, but "if they unilaterally offer ... wages at 75 percent or 50 percent benefit cuts, that would be absolutely wrong and a betrayal of the process."