To exit bankruptcy, Philadelphia Newspapers L.L.C. yesterday presented a $92 million plan that would use cash and property to clear about $300 million in secured debt.
The plan, which was filed with U.S. Bankruptcy Court, would provide $66.6 million for creditors and $25 million to cover bankruptcy costs, including professional fees and short-term financing.
The $66.6 million includes $35 million in new investment and ownership of the company's headquarters building at 400 N. Broad St.
The plan, which still requires court approval, also calls for the media firm, which owns The Inquirer, the Philadelphia Daily News, and Philly.com, to be put up for bid to determine whether the company's proposal is the best deal for creditors.
If a bidder comes forward and offers a better proposal for creditors, the company could be sold.
The plan, then, represents a gamble by the current management that its offer to creditors exceeds the present market value of the company.
It also defines even more starkly the battle between Brian P. Tierney, the company's chief executive officer, and his local investors and Philadelphia Newspapers' largest debt-holders, firms such as Angelo, Gordon & Co. and CIT Group Inc., which have outlined a plan in which they would take over the company and install new leadership.
The company's reorganization plan calls for the present leadership to be retained and Tierney to remain as CEO.
It almost certainly faces challenges from creditors before it can be approved by a judge. According to the company's timeline, if all went its way, the plan could be approved by early November.
There was virtually no reaction from creditors last night.
Lawyers representing a number of the key senior lenders did not respond to messages for comment. Gary Schildhorn, a lawyer representing a committee of unsecured, or second-tier, creditors in the case, said the committee was glad the company had finally filed its plan. He offered no comment beyond that.
In a court filing last week, lawyers representing senior creditors were dismissive of outlines of what turned out to be the company's eventual plan, describing it as "nothing but a prelude to additional litigation" and designed to allow some of the original investors in the paper to "salvage value from their investment."
The new owners, under the plan, would be a three-member group led by Bruce Toll, vice chairman of Toll Bros. Inc. He was one of the original investors who bought the company in 2006.
