For the second time since April, a group of investors spearheaded by Angelo, Gordon & Co. has won an auction to purchase the assets of Philadelphia Newspapers LLC, including the Philadelphia Inquirer and Daily News. The latest bid was made on Sept. 23 and is worth about $105 million, well below the $139 million April agreement with the lenders, now operating under the name Philadelphia Media Network.
Although more than a dozen other unions tied to the production of Philadelphia's largest yet financially strapped two newspapers renegotiated labor deals with a potential new ownership group, the decision to dig in by a union representing the former publisher's delivery drivers scuttled the previous purchase. After passing a second deadline to complete negotiations between Philadelphia Media Network and the former owners of the Philadelphia Inquirer and Daily News (Philadelphia Newspaper LLC) without a deal with a local Teamsters Union, the purchase fell through. Lenders opted to back out of funding the deal after the union refused to budge on issues that included pension program changes. Philadelphia Media Network had come to terms with no less than 13 other unions tied to the publishing outfit since its April agreement to purchase Philadelphia Newspaper's assets for $139 million.
U.S. Bankruptcy Judge for the Third District Stephen Raslavich, who barred Philadelphia Media Network from using a controversial but very common credit bidding tactic to purchase the newspapers and other assets in April, ordered the subsequent Sept. 23rd to be a cash-only, "as is" purchase that would need to be settled by mid-October. The Angelo, Gordon & Co. group won again. Raslavich had extended the original deadline for Philadelphia Media Network to settle terms with unions by two weeks after the original deadline of Aug. 31st was reached without deals with at least three unions. It appears unlikely the judge would want to do so again.
The new owners likely will face similar troubles in renegotiating the Teamsters union contract and, perhaps more importantly, industry problems that include lower readership, escalating costs and online, often free, advertising vehicles that take away from traditional newspaper revenue streams. Bruce Nathan, Esq., Lowenstein Sandler PC, said newspaper ownership old and new will continue to face a tough road:
"They need to revamp their product for the long-term. But frankly, it's expensive and very challenging and the ad revenues are not the same." Nathan predicated that with so many companies being overleveraged financially, it means some publishers simply "don't have the time" to update their business models in order to survive.
Brian Shappell, NACM staff writer