By: KATHY MATHESON/The Associated Press
(AP) A federal judge cleared the way for Philadelphia’s two major newspapers to emerge from bankruptcy protection, confirming a reorganization plan on Monday despite objections from employee pension officials.
Chief U.S. Bankruptcy Judge Stephen Raslavich said the plan is in the best interest of creditors and called it “a noteworthy achievement” in the bitter 17-month legal battle over the papers.
The decision ushers in the final stages of new ownership for The Philadelphia Inquirer, Philadelphia Daily News and their shared website philly.com. Philadelphia Media Network Inc. is poised to take over the outlets when the sale closes, likely sometime in August.
“We’re very pleased,” said Larry McMichael, lawyer for Philadelphia Newspapers Inc., the company that filed for bankruptcy protection in February 2009. “This has been a difficult case from the outset, but one of tremendous public importance.”
Local investors purchased the papers in 2006 for $515 million, but ran aground amid industrywide revenue declines. The creditors, including Credit Suisse and Angelo Gordon & Co., bought the papers for $139 million at an auction in April.
The three-day confirmation hearing for the reorganization began last week.
On Monday, attorneys for several employee pension funds objected to the plan because the new owners would not assume the obligations of the outgoing company.
They estimated $174 million in “withdrawal liability” for ending contributions, and said the financial hit could jeopardize future payments to retirees.
The new owners argued the bidding rules absolved them of pension obligations. They are looking to switch from defined pensions to 401(k) plans.
Raslavich agreed the new owners are not obligated to contribute to the pension plans, and said there likely wouldn’t have been any sale with a $174 million liability on the table. He noted the funds’ attorneys did not object to the bidding rules before the auction.
John Kilgannon, a lawyer for the Teamsters pension fund, indicated he would appeal Raslavich’s decision.
The new owners must now negotiate new contracts with employee unions and close the sale. Fred Hodara, a lawyer representing the creditors, said they have been making “real progress at the (bargaining) table.”
The newspapers have about 2,000 full-time and 2,500 part-time employees, most of them unionized.