Feb. 22 (Bloomberg) -- The owner of the Philadelphia Inquirer and Philadelphia Daily News filed for bankruptcy amid declining advertising sales, more than 2 years after a buyout led by local businessman Brian Tierney.

Philadelphia Newspapers LLC listed both assets and debt of as much as $500 million each in a Chapter 11 petition filed today in U.S. Bankruptcy Court in Philadelphia. Seven other units also sought protection including Philadelphia Media, PMH Acquisition, Philly Online and PMH Holdings.

Philadelphia Newspapers, created in June 2006 when Tierney’s group bought the titles from McClatchy Co. for $562 million, joins other U.S. publishers in bankruptcy as the economic crisis exacerbates declines in ad spending and readership. Journal Register Co., owner of 20 daily newspapers, sought protection yesterday, citing “slumping advertising revenues.” Tribune Co., owner of the Chicago Tribune, sought protection Dec. 8, a year after being taken private by Sam Zell.

Tierney and his partners, including Bruce Toll, co-founder of homebuilder Toll Bros., had no experience running a newspaper before they bought it in May 2006. Tierney, an advertising executive, said the purchase of the Inquirer would return the paper “to a family of civic-minded, long-term investors.”

Cost Cuts

Five months after buying the publications, Tierney cited weak advertising revenue when eliminating 68 jobs, or 17 percent of the Inquirer’s editorial staff. The cuts came two weeks after unionized newsroom employees agreed to forgo a pay raise and give back $5 million in pension and sick-leave benefits.

In January 2008, Tierney told employees costs had to be reduced by 10 percent to avoid “a dire situation.” Union trustees sued the company in April, claiming the publisher sought to gain control of a union pension fund covering more than 2,000 current and former employees.

The Inquirer, founded in 1829, is the U.S.’s third-oldest daily newspaper and has won 18 Pulitzer Prizes. The Daily News, a tabloid, was founded in 1925. The two have had a common owner since 1969, when they were bought by Knight Newspapers Inc.

The case is In re Philadelphia Newspapers LLC, 09-11204, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Philadelphia).

To contact the reporters on this story: Dawn McCarty in Wilmington, Delaware at dmccarty@bloomberg.net; Tiffany Kary in New York bankruptcy court at tkary@bloomberg.net

Last Updated: February 22, 2009 23:05 EST