Tierney battling for long-term health of Philly papers

By Tom Hals

PHILADELPHIA (BestGrowthStock) – If secured lenders end up controlling the bankrupt publisher of the Philadelphia Inquirer, its chief executive hopes his year-long legal fight has “shamed” them into taking a thoughtful long-term view of the business.

Brian Tierney told Reuters on Thursday that he expects at least two qualifying bids from the “nine interested parties” by Friday’s deadline, forcing an auction on Tuesday for Philadelphia Newspapers LLC, which also publishes the Philadelphia Daily News tabloid.

The auction will mark a major step toward ending a Chapter 11 that has been unusually contentious, even by the brawling standards of bankruptcy.

The publisher has spent about $30 million on lawyers and advisers in the case, a huge amount given the company’s straight-forward financing and monthly revenues of a little over $20 million.

“I’ll feel pretty good if, God forbid, the lenders do win but I’ve shamed them into putting together a business plan that has very little debt on the company. That would be a home run,” Tierney said. “Because the original plan was to tie a noose around the neck of this company, and therefore my employees, and throw them off the side of a bridge.”

More than one bid was received by the deadline on Friday and the entries would be examined over the weekend to determine if they qualified, a spokesman for the publisher said.

When the company filed for Chapter 11 last year, secured lenders offered a reorganization similar to one recently used by the publisher of the Denver Post — post-bankruptcy equity for management in return for a speedy trip through bankruptcy court.

But the company would still have been burdened with debt. “It’s kind of like ‘let’s get the car out of the shop as fast as we can’ but you haven’t fixed the brakes yet. Maybe we should fix the brakes.”

The case has been dogged by bitter legal fights.

Tierney, 53, also has used ads and press conferences to disparage hedge funds such as Angelo Gordon & Co for seeking control by buying the company’s $318 million secured debt for what he said was 12 cents on the dollar.

Of course, 12 cents on the dollar is roughly equal to the $35 million in cash the company’s chosen bidder has proposed paying to secured debt holders. The secured lenders, which also include Citizens Bank (RBS.L: ), Eaton Vance Management and numerous other investors, would also get real estate.

On Wednesday, that chosen bidder, a group led by Toll Brothers Inc Vice Chairman (TOL.N: ) Bruce Toll, withdrew its bid but said it planned to enter another by the deadline.

Toll was an investor with Tierney in 2006 when he acquired the publisher for $562 million. The bankruptcy wiped out those investors, including the $10 million Tierney put up.

Tierney said he was surprised Toll withdrew his bid and did not know why it was pulled. He reiterates he is not working for Toll.

“I want to go into to court and be able to put my hand on the Bible and take an oath that I don’t have a deal, a wink, a nod or nothing.”

To a lot of bankruptcy professionals, including an Appeals Court judge, the company’s reorganization plan appears aimed at scrubbing the company of its debt but leaving it in the hands of insiders.

A key component of that plan was a relatively novel provision that prevented credit bids, or allowing the secured lenders to bid what they are owed, which was upheld through several layers of federal courts.

Bidders are by no means knocking down his door for a chance to own a business in the grip of a decade-long decline.

Tierney said he has flown to Texas and New York to woo “intentional bidders” including Rupert Murdoch, the chief executive of News Corp (NWSA.O: ) which owns the New York Post and Wall Street Journal.

Tierney gives every impression that he is a former public relations leopard who has changed his spots and fallen in love with his hometown papers.

He arrived for an interview with the two Daily News reporters who earned the publisher its first Pulitzer Prize in more than a decade, a prestigious recognition that was the Inquirer’s birth right in the 1970s and 1980s.

Tierney gushed about pricing models and designing iPad aps and new editions and investing in quality journalism for the long haul. He envisions papers with smaller circulation, that cost more but that also deliver more for readers.

Court documents show some investors were grudgingly pleased with his management, which has cut costs by $110 million while investing in the papers.

“I just won’t give up on this company and its people.”

Recent court filings show concerns that Tierney might pull the plan of reorganization if the auction does not go his way, prompting yet more fighting.

“It will break my heart if accidental owners take over who don’t care.”

Citizens Bank, Angelo Gordon, Eaton Vance and attorneys for Bruce Toll and the secured lenders did not immediately return calls for comment.

Stock Market Research

(Reporting by Tom Hals, editing by Dave Zimmerman and Carol Bishopric)

Tierney battling for long-term health of Philly papers