A deal to sell the Philadelphia Inquirer newspaper fell apart, prompting the bankrupt owner of the paper to organize a new auction at which Raymond Perelman, father of billionaire Ronald Perelman, may bid.
“We will have another auction,” U.S. Bankruptcy Judge Stephen Raslavich in Philadelphia said today. “The auction will be all cash, as is, where is, and it contemplates a rapid closing.”
Lenders today backed out of a contract to buy Philadelphia Newspapers LLC, operator of the Inquirer and the Philadelphia Daily News. The sale failed after the Teamsters Union voted down a proposal to replace their pension with a new retirement plan, John P. Laigaie, head of union Local 628 said in an interview.
The lenders and the company will return to court Sept. 16 seeking approval of auction rules designed to prevent a new buyer from pulling out. Among the proposals will be a requirement that the winner post a deposit worth 15 percent of the winning bid, and the elimination of any conditions to closing, said Lawrence G. McMichael, a lawyer for the company.
Raslavich said that assuming he approves the auction rules this week, public bidding will take place on Sept. 23.
The newspaper company filed for bankruptcy in February 2009, blaming the recession and a fall in advertising. Perelman was among local investors who lost an auction this spring to the company’s main lenders, including hedge fund operator Angelo Gordon & Co. and a unit of Credit Suisse Group AG.
J. Gregory Milmoe, a lawyer for Perelman, said in an interview that his client is still interested in buying the company.
“He certainly wants to be involved in helping Philadelphia,” Milmoe said.
Perelman declined to comment after the hearing.
Lender attorney Fred Hodara said his clients plan to continue pursuing the newspapers. He said it is too early to tell whether any new bids will be higher or lower than the previously agreed-on $139 million purchase price.
The newspapers can continue to operate because they have enough cash and are approaching the busiest time for advertising sales in the industry, McMichael said.
“There is no reason for panic by anyone,” the attorney said. “There are no worries about shutting down.”
Under the company’s plan to exit bankruptcy, a group of the newspapers’ lenders, had until noon today to complete the purchase.
Union Pension Plan
The sale collapsed after members of the Teamsters Union refused to agree to change their pension plan, Laigaie said. 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.
The new plan would allow a buyer to close even if they had no new union deal.
Laigaie said the lenders tried to bring in media executives, like former Newsweek publisher Greg Osberg, who did not understand Philadelphia and angered union members.
“Their attitude was like ‘You have until high noon,’” Laigaie said. “They didn’t get it. This is Philadelphia. This is a labor town.”
The case is In re Philadelphia Newspapers LLC, 09-11204, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Philadelphia).