The publisher of a number of newspapers including the Philadelphia Inquirer, Philadelphia Newspapers LLC, received the go-ahead from a bankruptcy judge on an exit plan that will give control of assets to a group of lenders.
The bankruptcy exit plan approval marks the end of a stand-off between several parties that lasted for months in the courts, according to an article from the Wall Street Journal.
The approval came from the U.S. Bankruptcy Court in Philadelphia, PA and Judge Stephen Raslavich. The reorganization plan was unique in that it included a sale of the business, totaling $139 million, which had not already been approved by the bankruptcy court.
As Philadelphia Newspapers LLC worked the sale of the company into the reorganization plan, it also blocked its lenders from bidding their debt in exchange for assets, according to the article. The group of lenders was not happy with this maneuver, and they've filed numerous legal challenges in response. Among these challenges was an appeal that rose all the way up to the Third Circuit Court of Appeals.
Even as Philadelphia Newspapers LLC succeeded in winning its court cases, it could not keep its lenders from taking control of the company.
The lenders that took control did so by placing the winning bid in an auction that took place in April of 2010. The winning lenders include a group containing Angelo, Gordon & Co. and Credit Suisse. Among the groups that did not win in the bidding process was a group of local investors that, according to the article, Philadelphia Newspapers LLC would have preferred take control.
On the third day of confirmation hearings, lawyer Fred Hodara took his place beside the bankrupt company’s legal representation, symbolically representing how those who were formerly at odds in the courtroom would be moving forward in the future, given the approval of the bankruptcy plan.
“This is a new day, a new enterprise, a new opportunity for this company,” he said of the decision. “The funding will be fresh and new. The entire capital structure is new.”
There were not many critics of the Chapter 11 bankruptcy reorganization plan in attendance as the hearings concluded. Those remaining were representatives of the company’s pension fund, who warned that the plan would come with $174 million in pension fund withdrawal liability.
These representatives said that a liquidation, rather than the reorganization plan, would have come closer to granting pension fund claimants the funds that they had a right to. The effects on retirees and beneficiaries could be catastrophic, lawyers argued.
The publisher argued, on the other hand, that any deal hinged on the buyer’s ability to purchase Philadelphia Newspapers LLC assets without the burden of the pension liability. No buyer, in other words, would have taken on such liability.
The judge, ultimately, sided with the publisher, and agreed that a buyer should not have to take on the liability that the pensions represented.
The reorganized company will be known as Philadelphia Media Network Inc., and will be led by a former president and publisher of Newsweek, Greg Osberg.