Daily News, Inquirer sale plan OK'd by bankruptcy judge

A federal bankruptcy judge yesterday approved a plan to bring the Daily News and Inquirer out of Chapter 11 with a sale to a coalition of investment firms, willing to put up $105 million in cash for the newspapers and their Web site, Philly.com.

The confirmation decision, by Chief U.S. Bankruptcy Judge Stephen Raslavich, leaves one big hurdle, or 14 smaller ones, to be cleared before the deal closes: The new ownership group, known as Philadelphia Media Network Inc., is seeking contract concessions in excess of 10 percent from the 14 union bargaining units that produce and deliver the daily newspapers.

"There's really just one step left," said Fred S. Hodara, the bankruptcy lawyer representing the senior lenders who want to take over the company. "All we need to do is get each of these CBAs [collective-bargaining agreements] done. . . . It's feasible to be close by August 1. It depends a lot on the reasonableness of all the parties."

The new ownership group has held bargaining sessions with the largest single union, the Newspaper Guild, representing about 515 reporters, editors, photographers, advertising salespeople and others.

But talks with other unions have barely gotten off the ground - particularly with Teamsters Local 628, representing 435 drivers, building-services and security personnel, whose president, John Laigaie, is openly hostile to the new owners.

Small delegations of Teamsters already have approached some of the newspapers' local advertisers, complaining about the owners' requests for cuts in wages, pensions and other compensation. The Teamsters also are distributing a flier - including the cell-phone number of the new owners' chief operating officer, Bob Hall - that suggests businesses may be asked to pull their advertising "if the company continues with its unconscionable tactics."

"We're not hedge-fund investors out of New York," Laigaie said in a phone interview last night. "We live here, we work here, we belong to communities here. . . . If these new owners want to beat union members down to a level that is unacceptable, we think this is a fair thing to ask of businesses where our people live."

Over opposition from both the Teamsters and the Guild, Raslavich ruled yesterday that federal bankruptcy law permits the new ownership group to treat $174 million in various pension liabilities as unsecured claims, likely to be written off for pennies on the dollar. The liabilities result largely from poor investment performance and the owners' announced intent to stop contributing to multi-employer pension plans. None of the three bidding groups that competed to buy the newspaper company at an April 28 auction would have participated if the enterprise was not offered free and clear of pension obligations and other debts, Hodara said.

But the Teamsters' pension-fund attorney, John C. Kilgannon, suggested that the union may appeal the pension-underfunding issue to U.S. District Court.

And Laigaie said that apart from any legal issues, his union members were upset with a proposal by the new owners to set up a new, 401(k) pension system, instead of contributing to the Teamsters' current defined-benefit plan.

"The pension issue is the number-one issue with us," Laigaie said.

"We're never gonna be rich; just let us retire with a decent retirement."