Bob Hall, publisher of The Philadelphia Inquirer and Philadelphia Daily News from 1990 to 2003, would be part of the management team if creditors take over the company, they said Friday.
Hall has been advising the bank lenders since April and attended Friday's court hearing.
Philadelphia Newspapers is seeking to shed most of its $400 million in debt by repurchasing the company through a bankruptcy auction for about 22 cents on the dollar. Publisher Brian Tierney, a former advertising executive who led the 2006 purchase, would remain in charge.
The auction is open to other bidders, although only the creditors are known to be preparing a rival bid. Bids are due by Oct. 22 and a bankruptcy judge would later approve the sale.
Both sides insist they want to keep both the broadsheet Inquirer and tabloid Daily News operating. The company also operates the Philly.com Web site.
And both sides -- along with any other bidder -- could soon be free to start negotiations with more than a dozen unions whose contracts are expiring, including about 550 reporters, photographers and advertising staff in the Newspaper Guild.
That right to negotiate was one of several contentious issues resolved by the company and creditors through late-night mediation this past week.
The company also agreed to terms of a $15 million short-term loan from creditors to cover seasonal slumps in revenue, and will abandon attempts to go elsewhere for the loan -- and put that bank ahead of existing creditors for repayment.
Creditors will extend for two months the company's exclusive right to present a reorganization plan. Their plan proposes the auction and posts a starting bid of $37 million in cash plus real estate and bankruptcy costs. The company values the plan at $92 million.
The debtors propose to keep $60 million of existing debt plus $25 million in bankruptcy costs on the books, in contrast to the company's plan to shed the existing debt.
''We believe that it achieves the highest and best value for estate assets for the benefit of creditors,'' said lawyer Larry McMichael, who represents Philadelphia Newspapers. ''We believe that because we haven't been able to find anybody else to put money in.''
Ailing newspapers in Boston, Minneapolis and other U.S. cities have all struggled to raise capital or find new buyers, he noted.
The investors pledging the $37 million include housing mogul Bruce Toll and the Carpenters' Union Pension Fund, both members of a group that pooled $150 million and borrowed the rest to buy the company in 2006 for $515 million. The new roster also includes an unidentified investor behind a private equity fund called Penn Matrix Investments.
The Philadelphia-area investors are all committed to the community, not just to high returns, McMichael said.
The company has been trying to rally support for local ownership through a ''Keep It Local!'' publicity blitz that involves full-page display advertisements, stickers, buttons and a Web site. Tierney sported one of the large red, white and blue buttons on his lapel in court Friday, and Teamsters loyal to him chanted the slogan outside the courthouse.
The creditors took offense Friday, questioning the use of estate assets to fund what Citizens Bank lawyer Andrew Kassner called ''a very harsh publicity campaign that has been launched against the lenders.''
Lawyer Fred Hodara, who represents the secured lenders, labeled it a ''Keep It Brian'' effort, referring to Tierney.
Hall's hiring presumably gives creditors a local of their own. Hodara described him as a Philadelphian. He served as publisher during the era of Knight-Ridder ownership.
By: Maryclaire Dale Creditors seeking to take control of Philadelphia Newspapers in a hard-fought Chapter 11 bankruptcy case have hired a longtime publisher of the two dailies as an adviser.