By: Maryclaire Dale, Associated Press writer
Creditors poised to take over Philadelphia’s two largest newspapers hope to move employees from defined pensions to 401k plans or some mix of both, their lawyer said after a bankruptcy confirmation hearing Thursday.
Angelo Gordon & Co., Credit Suisse and other creditors who won The Philadelphia Inquirer and the Philadelphia Daily News for $139 million at an April auction pledge to keep both newspapers alive. But they expect more cost-cutting, including possible salary cuts, furloughs and pension changes.
A bankruptcy court hearing to confirm the sale began Thursday with discussions about who will assume liability for pending defamation lawsuits. The hearing continues Friday with pensions on the agenda.
The company, which also operates the Philly.com web site, will retain just $36 million in debt, down from $400 million before the February 2009 bankruptcy filing.
The creditors say they are looking to switch from defined pensions to 401k plans after the expected Aug. 1 closing date, and will assume no prior pension obligations. Contract talks are under way with about 14 unions that represent employees at the newspapers, including a Teamsters local representing drivers and others and a local unit of the Newspaper Guild.
“No purchaser of this newspaper was going to take on the pension plans. It’s simply not feasible,” said creditors’ lawyer Fred Hodara.
The plans may be underfunded, he said, but they are not unfunded.
The Guild objected to the confirmation on grounds the prior owners should be made to pay “withdrawal liability” of $58 million for withdrawing from the pension fund. The fund is currently poised to honor payments for only about 20 years, administrator Bill Ross said.
“The people who are participants in the pension plan are collateral damage (in bankruptcies). You see it over and over again,” said Guild lawyer Susan Murray.
Secured creditors are expected to get less than 15 cents on the dollar, while unsecured creditors will get nothing, according to testimony Thursday before Chief U.S. Bankruptcy Judge Stephen Raslavich, who must rule on the plan.
Local investors led by public relations executive Brian Tierney bought the papers in 2006 for $515 million, but ran aground amid industrywide declines in advertising and circulation. Tierney rallied local philanthropists who bid more than $100 million for the company at the April auction, but the creditors prevailed.
The new company, to be called Philadelphia Media Network Inc., has installed former publisher Bob Hall as chief operating officer and former Newsweek executive Greg Osberg as publisher.
The newspapers have 2,000 full-time and 2,500 part-time employees, most of them unionized workers.