The Philadelphia Inquirer and Daily News are up for sale again.
A federal bankruptcy judge ordered a new auction for the papers and the website, Philly.com, on Tuesday after prospective new owners of the media outlets failed to bring their deal to closing.
The order by Chief Bankruptcy Judge Stephen Raslavich terminated the purchase of the papers' parent company, Philadelphia Newspapers L.L.C., by a group of its senior lenders.
The deal collapsed because the prospective buyer, Philadelphia Media Network Inc., was unable to reach a contract agreement with one union, Teamsters Local 628, which represents the company's drivers.
"We are extremely disappointed," said Gregory Osberg, chief executive officer of Philadelphia Media Network. "It is a tremendous waste of time and money to have to redo the auction."
John Laigaie, the president of Local 628, said his members were delighted that Philadelphia Media Network's purchase had fallen apart.
"The way they look at it, they now have another chance to fight another day," he said of his members.
Local 628 was the only one of 16 unions to not reach a contract agreement with Philadelphia Media Network.
The Newspaper Guild, which represents editorial employees at the papers, issued a harshly worded statement after the decision to hold another auction was announced, saying the drivers had jeopardized "thousands of jobs and the entire company by hijacking and derailing the closing process."
Raslavich scheduled the new auction for 10 a.m. Sept. 23. The sale will be in his courtroom in the Robert N.C. Nix Sr. Federal Building at Ninth and Market Streets. He said he expected the sale to be quick, with final closing by mid-October.
He said that one difference from the company's first auction, in April, would be the absence of a provision to allow the successful bidder to walk away from the sale if it could not reach contract agreements with the company's unions.
The recent sale of the company collapsed because there was such a provision.
The prospective new owners, operating as Philadelphia Media Network Inc., bought Philadelphia Newspapers L.L.C. at the April auction for $139 million.
Philadelphia Media Network included many of the company's largest creditors, including Angelo, Gordon & Co.; Credit Suisse, and the Alden Capital Group. As a group, the creditors were owed $318 million.
Fred S. Hodara, lead attorney for Philadelphia Media Network, said his clients intended to bid for the company at the coming auction.
"We will fully expect to win again," he said.
Who else might bid was uncertain Tuesday.
There were two other interested parties when Philadelphia Media Network made its successful offer.
One was Stern Partners, a Canadian company that ultimately did not bid. The other was a group of local investors led by local businessman Raymond G. Perelman. The local investment group was championed by Brian P. Tierney, then-chief executive officer of Philadelphia Newspapers L.L.C.
Stern did not return a request for comment Tuesday. Perelman, however, was conspicuously in the courtroom when Raslavich announced the new auction. He declined to say what he intended do.
"I want to see all the paperwork first," he said, referring to bid procedures outlining how the auction will be conducted and what will be expected of bidders.
Tierney, who has stepped down as CEO of Philadelphia Newspapers, declined comment Tuesday when asked about the new auction.
As described by Raslavich, the sale will be conducted on an "extremely accelerated time line."
There will be a hearing Thursday to approve bid procedures, he said.
Under the proposed bid procedures, all bids would be made in cash. The eventual winner would have to put up a non-refundable cash deposit equal to 15 percent of the purchase price. If the property went for $139 million again, the deposit would be about $20 million.
The winner will be the highest cash offer for the company, said Lawrence McMichael, lead lawyer for the company.
Raslavich, in announcing the new auction, said he thought it was the best option available at this point.
"In my judgment, this choice has the least likelihood of impacting the going-concern value of the company and the best chance of ensuring ongoing employment of the company's employees."
Joseph Bondi, the interim chief executive of the company, said he was disappointed that the sale had fallen through but optimistic that the new auction would lead to a successful conclusion of the bankruptcy, which began in February 2009.
"We want to assure everyone that this development will merely delay our exit from bankruptcy and sale by a few weeks," he said in a statement. "This will certainly not result in the liquidation of the company and we have sufficient cash to continue to meet operating expenses pending emergence from Chapter 11."
The new auction could significantly impact contract negotiations with the company's unions, however.
Should a new bidder win the company, McMichael said, new contracts would have to be reached with all of unions, including those that have already reached accords with Philadelphia Media Network.
If Philadelphia Media Network successfully wins the company again, it has committed to honor the agreements it has reached with 15 company unions.
It may, however, impose new contract terms on the drivers, who have refused to settle, according to Osberg.
The drivers were opposed to Philadelphia Media Network's proposal to pull out of a Teamster pension fund and offer the drivers a choice between a 401(k) program or a retirement fund jointly administered by the union and the company.
Osberg said there remained "no wiggle room on the pension" issue.