Judge Faults Newspapers, Creditors In Ad Dispute
PHILADELPHIA (AP) - Local investors hoping to win Philadelphia Newspapers at a bankruptcy auction should pay for the newspapers' "Keep It Local!'' publicity campaign, a judge suggested Wednesday.
At the same time, he called complaints about the ads from rival creditors "overheated,'' and said they could buy their own ads to hawk their bid for The Philadelphia Inquirer, the Philadelphia Daily News and Philly.com.
But he called the ad campaign "slanted, not even to a local bidder, but to the incumbent.''
Chief Executive Brian Tierney, Toll Bros. co-founder Bruce Toll and others pooled $150 million toward the $515 million purchase price in 2006 to buy the media company. They filed for bankruptcy in February, citing $400 million in debt.
Tierney hopes to stay at the helm through a "resale'' of the company at an October auction. A new owners' group comprised of Toll, a union pension fund and an anonymous Philadelphian have posted the opening bid, which they value at $92 million, or 23 cents on the dollar. The package includes $37 million in cash plus real estate to erase the debt.
Senior creditors are preparing their own bid, which would keep $60 million in existing debt on the company books. They would replace Tierney with a management team that includes former publisher Bob Hall.
Tierney argues that the residual debt would cripple the new company.
In a nod to his former life as a publicist and advertising executive, he has blasted the "Keep It Local!'' slogan on everything from stickers to subscriber bills to fullpage newspaper ads.
Creditors complain the ads demonize them and corrupt the bid process - and are an improper use of estate funds. The ads suggest the bank and hedge-fund creditors would slash payroll and news coverage. They include the Royal Bank of Scotland Group PLC, the CIT Group Inc. and Angelo, Gordon & Co.
The fight over the cost of the campaign may resolve itself before a scheduled hearing next week.
According to Tierney, the company spent $12,000 to $15,000 on buttons and stickers, but has no additional spending planned. The print ads fill unsold advertising space, he said.
The bankruptcy case has been unusually acrimonious, and Raslavich voiced dismay that court-supervised mediation has appeared to stall, after some progress last month on interim financing and other issues. At his urging, the two sides delayed arguments on the publicity campaign Wednesday and instead met with the mediator.