A marathon auction for Philadelphia's two daily newspapers took tumultuous twists and turns as Philadelphia-area philanthropists joined forces to fight creditors in the bankruptcy bidding war.
Repeated rounds of all-night bidding lifted the price for the company that owns The Philadelphia Inquirer and Philadelphia Daily News past a former offer of $77 million in cash, real estate and financing, a member of the creditors team said.
Robert Hall, one of about 50 people involved in the closed-door auction at a New York law firm, is a former publisher of the Philadelphia newspapers who now consults for the creditors.
"It's well in excess of the original bid," Hall said during a late-morning break Wednesday, the first since bidding began shortly before 4 a.m. The oddly timed start followed 17 hours of wrangling by the parties over how to rank the bids, which include both cash and non-cash terms.
The auction is part of a bankruptcy reorganization plan filed by Publisher Brian Tierney, home builder Bruce Toll and others who borrowed heavily to buy the newspaper company for $515 million in 2006. Secured creditors are bidding to try to recoup some of their $318 million investment. The Canadian investment firm Stern Partners is the third bidder.
According to Hall, creditors during the auction dropped a plan to fire all 4,500 full- and part-time employees before rehiring half or more. Company officials disclosed this week that the plan was part of the creditors' opening bid. The news prompted outrage, and talk of a strike, from members of the company's 14 labor unions.
"It was blown out of proportion," Hall said, adding that any winning bidder would likely have to reduce staff given unrelenting industry woes. "Every newspaper in the country is reducing operations."
Meanwhile, news came Wednesday that another Philadelphia philanthropist has joined the local effort to keep the newspapers in local hands.
H.F. "Gerry" Lenfest, a cable television mogul, said he called Publisher Brian Tierney on Tuesday and offered the local group up to $10 million in cash.
"The Inquirer, under the (current) management team has done a great job," Lenfest said Wednesday, praising in particular the newspapers' investigative reporting, which this month earned the Daily News a Pulitzer Prize.
"I don't know what would happen under different management," Lenfest said.
His last-minute arrival came just a day after Revlon Inc. chairman Ronald Perelman and his philanthropist father Raymond combined to pledge $27 million in cash and loans to the effort. The other investors include David Haas, an heir to the Rohm & Haas chemical company fortune; Philadelphia insurance broker William Graham, who lost his $31 million stake in the 2006 purchase, but agreed to chip in a smaller amount this time; and the Carpenters Union Pension Fund.
Toll, who served as chairman of Philadelphia Newspapers in recent years, changed his stake in the local bid last week, sending Tierney scrambling to find new investors. Toll has not returned calls for comment.
"I feel like I'm trying to ransom my 4,500 employees and get them out of captivity almost. And I'm praying, sincerely praying, that I'm able to do it," Tierney said during Wednesday's morning break. A former advertising executive, he lost his own $10 million investment in the 2006 purchase, but is not part of the new local ownership bid.
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