Pension issue won't delay Philadelphia newspapers' bankruptcy reorganization

A federal judge Thursday rejected a move by employee pension plans at The Inquirer and the Philadelphia Daily News to delay the reorganization of the bankrupt media company, removing an impediment to the company's reemergence under new ownership.

Chief Bankruptcy Judge Stephen Raslavich denied the request to put the reorganization on hold while the pension plans appeal the plan in U.S. District Court. The funds oppose the reorganization because the new owners will be absolved of responsibility for funding pension shortfalls.

Raslavich said the pension plans, led by the Teamsters Union fund and including other employee funds, had failed to make a strong case that they would suffer irreparable harm if the reorganization were completed. He said the company faced a more immediate threat of insolvency if the 17-month-old bankruptcy case were not concluded by September.

Raslavich on June 28 confirmed a plan in which Philadelphia Newspapers L.L.C., which owns The Inquirer, the Daily News, and Philly.com, will be sold for $139 million to 16 financial institutions that were among its senior lenders.

The lenders, who plan to rename the company Philadelphia Media Network Inc., said that the four pension plans claimed they were owed $174 million in unfunded liabilities - more than the company's sale price.

Raslavich said it was "clearly essential" to release the new owners from pension liabilities to complete the sale. He said the alternative "almost certainly" would be the company's liquidation.

The underfunded pension plans argued that they may become insolvent in the future, requiring a reduction in benefits.

In a related matter, the company's largest union, the Newspaper Guild, said it had tentatively reached agreement on a three-year pact that includes a 2 percent across-the-board pay cut and 10 unpaid furlough days per year, equivalent to an additional 4 percent cut. The Guild represents journalists, advertising, and circulation staff.

Union officials said the three-year deal would help meet the new owners' savings targets while protecting their members from deeper permanent pay cuts and, during the contract's first year, from layoffs.

The deal would save the company about $6 million in 2011 expenses, the union said.

Guild officials said the deal includes a 6 percent pay cut for commissioned ad salespeople, who will not face furloughs. The workweek will extend to 40 hours, from 371/2 hours.

Bob Hall, the new owners' chief operating officer, called the tentative agreement "a great move forward" and said the owners had also reached a tentative deal with a union representing about 20 mechanics, one of 14 bargaining units that have contracts with the paper.

Hall declined to discuss details or negotiations with other bargaining units.

Guild officials said the agreement would extend the union's jurisdiction to the papers' online operations by giving the Guild the right to represent editorial and ad-sales staffers at Philly.com. Also, for the first time, it would offer union members a 50 percent match for up to 6 percent of pay contributed to a company-sponsored 401(k) plan.