Philadelphia Inquirer Lenders Best Perelman in Bankruptcy Court Auction
Raymond Perelman, father of billionaire Ronald Perelman, was outbid in a bankruptcy court auction for the Philadelphia Inquirer and its sister publication by lenders for the newspaper who offered $105 million.
Perelman, 93, declined to raise his $85 million offer, which included $10 million from the Philadelphia Carpenters Union pension fund, he said in an interview after the auction. The Philadelphia-area resident said he decided to bid for the paper for the second time this year to ensure it survives the bankruptcy of its parent company, Philadelphia Newspapers LLC.
“We need a newspaper in Philadelphia,” Perelman said. “It’s an important part of the city.”
The auction was the second this year for the Inquirer and the Philadelphia Daily News. It began nine days after the newspapers’ main lenders backed out of a contract to buy the publications in a deal valued at about $139 million. The lenders, including hedge fund operator Angelo Gordon & Co. and a unit of Credit Suisse Group AG, returned with an offer similar to the earlier one.
Fred Hodara, an attorney for the lenders, said the group would have to complete the sale this time, even if it runs into the same problem with the Teamsters union that scuttled the last deal. The judge engineered a process designed to guarantee the sale will be completed, including requiring the lenders to post a non-refundable deposit of more than $15 million, Hodara said in an interview.
“There is no way that the buyer does not close,” he said.
The lenders refused to complete the previous deal after Teamsters members rejected changes to their pension plan.
The lenders and 14 of the 15 unions at the newspapers have agreed to new employment contracts, Hodara said. The only holdout is the Teamsters, which has rejected a proposal to convert its pension to a 401(k) retirement plan, he said.
The lenders still plan to replace the pension, Hodara said. Should the Teamsters, which represents about 200 truck drivers, continue to oppose pension changes, the lenders will still complete the sale, he said.
Hodara declined to say what the lenders would do if the Teamsters reject a new contract.
John P. Laigaie, head of Teamsters Local 628, didn’t immediately return a call seeking comment.
Cash, Real Estate
Under the current offer, the lenders will pay $105 million in cash for the newspapers. When the value of the real estate and other items are included, the transaction is worth about the same amount as the winning offer in the auction last spring, Hodara said. Philadelphia Newspapers had said the previous deal was worth $139 million.
U.S. Bankruptcy Judge Stephen Raslavich in Philadelphia said in court he will approve the auction results after minor wording changes are made to the sale contract.
“Things that were a little bit up in the air have now come down to the ground,” Raslavich said.
Philadelphia Newspapers filed for bankruptcy in February 2009, blaming the recession and a decline in advertising.
The filing came more than two years after public relations executive Brian Tierney and local investors including the Carpenters Union pension fund bought the company. Philadelphia Newspapers listed assets and debt of as much as $500 million each in court papers.
Tierney, who is currently the managing partner of Philadelphia Newspapers, said Sept. 22 in an interview that he won’t be part of the newspapers once they are taken over by the lenders.
The Inquirer, founded in 1829, has won at least 18 Pulitzer Prizes. The Daily News, a tabloid founded in 1925, won a Pulitzer Prize this year for investigative journalism. The two newspapers 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).
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