Back On The (Auction) Block

The Philadelphia Inquirer, Daily News, & Philly.com

A coalition of The Inquirer's largest debt holders and a partnership of local businessman Raymond G. Perelman and the Carpenters Union pension fund emerged yesterday as the only two bidders for our newspaper company. Both groups submitted initial bids by yesterday's noon deadline. It is not known how much either offered, but a minimum bid of $50 million was required. Bidders also had to put up at least $7.5 million as a cash deposit.

An auction is set for today at 10:00am in federal Bankruptcy Court in Philadelphia to determine who will take control of Philadelphia Newspapers L.L.C., which owns the Inquirer, Daily News, and Philly.com. The auction is the second for the company, which has been in bankruptcy since February 2009.

It seems certain to be the final chapter in a saga that began in 2006 when a group of local investors, led by Brian Tierney, bought the company for $515 million. However, within three years, the company filed for bankruptcy, owing its senior lenders $318 million. In order to resolve that debt, the company was put up for auction in April of this year.

The sale ended when a group of senior lenders representing 16 financial institutions (including Angelo, Gordon & Company, Alden Global Capital, and Credit Suisse) bought the company for $139 million, including $105 million in cash. The bid topped a $129 million offer from a group of local investors that included Perelman and the Carpenters' pension fund.

The second auction was necessary because the lenders, operating as Philadelphia Media Network Inc., failed to reach a contract agreement with the company's unionized drivers in time to meet last week's deadline for the sale and the conclusion of the bankruptcy. Philadelphia Media Network has said since last week that it planned to bid and prevail in today's auction.

Philadelphia Media Network had been far along in its takeover plans for the company when the deal fell apart. A chief executive officer, Gregory Osberg, was named and four members to a board of directors. It also had negotiated new contracts with 15 of the company's 16 unions. Fred S. Hodara, lead attorney for Philadelphia Media Network, declined comment yesterday after the bids were announced.

The second bid comes from an entity called Rayco L.L.C., which is made up of Perelman and the Carpenters Union pension fund, according to J. Gregory Milmoe, Perelman's attorney. Perelman's son, Ronald O. Perelman, owner of Revlon Cosmetics, took part in the bidding back in April. Perelman, who is 93 years old, did not return calls yesterday for any comment. He told the Associated Press that his son would not be part of the bid for the newspapers.

"Ronny has a genuine interest in it, but the money is mine," said Raymond Perelman. Ed Coryell, business manager for the Carpenters' fund, could not be reached for comment. The pension fund was among the original investors in Philadelphia Newspapers when it bought the Inquirer, Daily News, and Philly.com in 2006.

Perelman's latest bid was saluted by Teamsters Local 628, the union that represents the company's drivers. Efforts to get a contract with the drivers failed on the issue of a pension plan. Philadelphia Media Network said it would not continue in the pension plan, but would create and fund two defined-contribution programs instead. John Laigaie, president of Local 628, said he met with Perelman recently and came away believing the union could reach a resolution on the pension issue with him. "In talking to him, I really think he understands the needs of the workers," Laigaie said. Perelman is expected in court today for the auction.

Lawrence G. McMichael, lead attorney for Philadelphia Newspapers, said this auction should be a much shorter affair than the April sale, which went for 29 hours. "I think it will go quickly. I'm cautiously optimistic we won't be here real late tomorrow," he told Chief Bankruptcy Judge Stephen Raslavich yesterday.

Trivia Qs: If you are a native Philadelphian and of a certain age, you should remember another newspaper that was circulated here back in the day called "The Bulletin". If so, do you remember what year the newspaper ceased publication? Extra Credit: Do you remember where "The Bulletin" building was located? You can click here if you don't know the answers or just want to cheat-LOL!