"As of now, this great news organization is locally owned," Brian Tierney, chief executive officer of Philadelphia Media, said yesterday afternoon from a dais crowded with his fellow investors, to sustained applause from a group of newspaper managers and staff.
At 10 last night, Tierney and several of the investors threw a party - sandwiches and Tastykakes - at the Schuylkill Printing Plant near West Conshohocken, where investor Patricia Imbesi threw the copper switch to start the press run. They greeted workers and managers as they came on shift.
"We're going to show the world," Tierney told a group of pressmen and paper handlers. "This is going to be the best news organization in America. You don't have to worry about the corporate thing."
"Like with all new beginnings, I'm hoping we can move on and good things will happen," said Roger DeCicco, shop steward for Teamsters Local 169, which represents 24 newsprint handling workers. "I'm looking forward to working with the local guys."
Later, there were no speeches to hear over the din as Imbesi stood with Tierney and co-owners Leslie A. Brun and William A. Graham IV. As she threw the switch to start the papers winding rapidly along the overhead track system, a delegation of Mummers from the Hegeman String Band broke into "Alabama Jubilee."
"It's great. It's new life," said Phil DeFlorio, vice president of Teamsters Local 1414, which represents 500 mailers. Secretary-treasurer Mike Bernstein said he was looking forward to contract negotiations, which begin in two weeks.
Earlier, Natoli said the $5 million commitment for print, broadcast, cable, billboard and online ads compares with just "a few hundred thousand" yearly under previous ownership. In addition, a promotional campaign, including the slogan "Bringing Home the News," will feature "street teams" dressed as old-time newsboys at public gatherings, pro sports events, Shore boardwalks and Fourth of July parades.
Tierney spoke yesterday afternoon shortly after his assistant, Hilary Vadner, wired $515 million to the McClatchy Co.'s bankers to complete the purchase of the Philadelphia news outlets. McClatchy bought their previous owner, Knight Ridder Inc., on Tuesday and is divesting newspapers in Philadelphia and 10 other cities.
Philadelphia Media raised the $515 million cash price, plus about $20 million extra for legal, banking, accounting and other deal fees.
The firm's partners - nine individuals, three institutional investors, and Derby Media L.L.C., a group of Tierney's school friends - have invested about $150 million in the deal. Their equity makes them the new owners of the newspapers and Web site, which are now operated by Philadelphia Newspapers L.L.C. ("L.L.C." stands for "limited liability company," which combines the liability protection of a corporation with the tax and privacy benefits of a partnership.)
The rest is borrowed, in two big pieces - a term loan, which covers more than half the acquisition cost, and a higher-priced "mezzanine" financing arrangement, which PMH hopes to pay off quickly as the newspapers' financial condition improves.
Royal Bank of Scotland and Wachovia Corp. raised about $300 million by setting up an eight-year loan, priced at about 8.2 percent, and syndicating it to investors. That loan sold easily, according to people familiar with the sale.
Royal Bank also sold $85 million in higher-risk "mezzanine" debt, at 16 percent interest. The bank originally offered $105 million, at 14 percent interest, but buyers were scarce.
"We're getting paid for the risk we take," said one of the debt buyers, Jeremy J.E. Bloomer, a manager of Airlie Opportunity Fund L.P., a Greenwich, Conn., hedge fund. Airlie invested $15 million in the mezzanine financing, plus a smaller amount in Philadelphia Media equity.
Bloomer said his fund specializes in "high-yield" debt issued by smaller companies, which has a tough time finding buyers.
Bloomer said he had known Tierney and Philadelphia Media consultant Richard Thayer since the three were fraternity brothers at the University of Pennsylvania in the 1970s. He said he was confident that Tierney, a longtime advertising and public relations executive, "has the ability to jump-start the advertising" that is the newspapers' main source of income.
Other Philadelphia Media investors disclosed for the first time yesterday include Mike McNulty, who had been a founder, with fellow Philadelphia Media investor Mike Hagan, of Verticalnet Inc. in the 1990s, and home builder Ed Mahoney, a member of Derby Media, a group of former Tierney classmates headed by Britton Murdoch.
Graham, chairman of the Graham Co. insurance brokerage, which has taken over insurance contracts at the newspapers, said he had raised his investment in Philadelphia Media from $20 million to more than $30 million. That makes him the company's largest individual investor, exceeding chairman Bruce Toll.
Tierney was short on details of two key pieces of his plan: advertising and labor relations.
He said Philadelphia Media had already arranged for increased advertising from some of the city's largest companies. But he declined to identify those companies, noting that signed agreements were not yet in place.
Deals with the locals covering most of Philadelphia Media's 2,650 workers expire at the end of August, and officials of the Newspaper Guild and the Teamsters have said they have a lot of work to do in a short time if the contracts are to be renewed before that deadline.
"I'm proud of the fact we can pay living wages," Tierney said.
But he added that the company has to figure out how it can afford current expenses alongside such additional spending as the $5 million ad campaign, plus an estimated $16 million to $20 million, over two years, to add color printing capacity to four presses at the company's Schuylkill Printing Plant.
Tierney said he hoped talks would make it easier to deliver the Daily News from Inquirer distribution routes. And he said he hoped to add live video feeds of local news to Philly.com, "hour by hour, during the business day" - which will require arrangements with the Guild, union officials have said.
The group does not plan to file detailed financial statements. In judging their success, Tierney and Natoli urged newspaper-watchers to rely less on circulation figures and more on "readership" estimates and estimates of online readership.
Contact staff writer Joseph N. DiStefano at 215-854-5957 or firstname.lastname@example.org.