Creditors seek 'oversight' of Philadelphia Newspapers, LLC

Creditors for Philadelphia Newspapers, LLC, have called for "independent oversight" of chief executive Brian Tierney while the company undergoes Chapter 11 bankruptcy restructuring.

The request was filed yesterday as the secured lenders, which are owed nearly $300 million, objected to a motion by the firm, which owns the Daily News and Inquirer, asking the bankruptcy court if the company could use its cash to pay for its operations. A hearing on funding the paper's operations is scheduled for May 11.

In the filing the lenders said they would be willing to allow use of the cash if two independent directors are appointed to oversee the company's business and restructuring operations, among other conditions.

A phone message left for Jay Devine, spokesman for Philadelphia Media Holdings, the parent company of Philadelphia Newspapers, requesting comment was not returned last night.

The lenders said that the company's financial situation continues to deteriorate and that their interests are not adequately protected.

The lenders cited as evidence of mismanagement a $350,000 bonus and a $232,000 raise that was awarded to Tierney in December as the company was lowering its projected revenue in the face of an economic downturn. Tierney agreed to roll back the salary increase just after the company declared bankruptcy in late February. The lenders also claim that the raise and bonus were not properly disclosed.

Tierney has said the creditors had pressured him to make massive cuts to the company. Sources said some of the proposed cuts included closing the Daily News.

The lenders said in the filing that any suggestion that the purpose of this objection "is to immediately shut down the Debtor's operations is nothing more than a public relations tactic designed to hide the Debtor's own inappropriate actions."

Lenders lashed out at Tierney; Richard Thayer, vice president of finance; and Daily News publisher Mark Frisby for accepting large bonuses and raises while they missed two debt payments last year.

Tierney has said the company earned $36 million in 2008, not counting its massive debt. He predicted earnings of about $25 million this year.

According to creditor's court filing, that figure now appears to be more like $10 million. *