Philadelphia Newspapers LLC agreed to pay union pension funds as much as $1.5 million to clear the last major hurdle to the publisher’s plan to exit bankruptcy under the ownership of its lenders.
The seven pension funds, operated by unions including the Teamsters and the Newspaper Guild, agreed to drop an appeal of the company’s reorganization plan in exchange for the right to pursue $1.5 million in claims in the bankruptcy case, according to court papers filed last night.
“The parties have agreed to settle all outstanding controversies and claims,” attorneys for the lenders and the owner of the Philadelphia Inquirer and Daily News said in the papers, filed in the U.S. Bankruptcy Court in Philadelphia.
Under the reorganization plan, a group of lenders including hedge fund Angelo Gordon & Co. and a unit of Credit Suisse Group AG had until Aug. 31 to complete the purchase of the company and take control of the newspapers.
The lenders have said they don’t plan to continue contributing to the seven pensions once they gain control of the company. Canceling their participation would leave the pensions with a combined $28 million deficit, the unions claimed in court papers.
The company and the buyers haven’t made a final decision about whether to continue contributing to any of the pension funds, according to court papers.
The newspaper company filed bankruptcy in February 2009, blaming the recession and a slowdown in advertising.
The case is In re Philadelphia Newspapers LLC, 09-11204, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Philadelphia).