Bankruptcy Plan Calls for Philadelphia Papers to be Sold to Local Investors

By: Mark Fitzgerald Bankrupt Philadelphia Media Holdings LLC filed a reorganization plan Thursday that would turn The Philadelphia Inquirer and Philadelphia Daily News over to the local investor group headed by luxury home builder Bruce Toll, who are putting up $52 million in cash and credit.

The plan would eliminate all debt for the new company headed by Toll.

Philadelphia Media -- which listed $300 million in debt when it filed for bankruptcy last February -- creditors would be paid approximately $66 million in a combination of cash and real estate in Philadelphia's Center City.

The plan provides an additional $25 million to Toll's new company to pay bankruptcy exit costs.

"With this payment, the new owner will acquire the newspaper assets free and clear of existing debt," Philadelphia Media said. The Toll group will be taking over substantially all Philadelphia Media's assets except its Center City property.

The Toll group's $52 million includes $35 million in new equity and the funding of a $17 million letter of credit.

In addition to Toll, vice chairman of Toll Brothers, the new ownership will include Carpenters' Union Pension Fund and Penn Matrix Investments.

The reorganization plan is essentially a so-called Section 363 sale under bankruptcy law, allowing a new company to buy the assets but not the debt of a company in bankruptcy.

"To make certain that the reorganization plan is a full and fair market offer, the plan also calls for a 60-day review process during which time potential bids from other parties can be presented and evaluated," Philadelphia Media said in announcing the plan.

The plan must also get approval of a disclosure statement, a vote of approval from creditors and confirmation by the bankruptcy court. Philadelphia Media said the process is expected to take 60 to 90 days.

Philadelphia Media Holdings CEO Brian Tierney assembled a group of local investors including Toll to buy the newspapers from The McClatchy Co., which acquired them in the 2006 purchase of Knight Ridder.