Philadelphia Newspapers L.L.C., which owns The Inquirer, the Philadelphia Daily News, and Philly.com, filed for bankruptcy protection yesterday in a bid to restructure its $390 million in debt load.
The company, bought by a group of Philadelphia-area investors for $562 million in 2006, said the voluntary Chapter 11 filing would not interrupt its daily operations.
"This restructuring is focused solely on our debt, not our operations," chief executive officer Brian P. Tierney, who led the group that provided about $150 million of the purchase price three years ago, said in a news release.
"Our operations are sound and profitable," said Tierney, referring to operating profits before interest and certain other costs.
The financial burden from an advertising downturn, rising costs for newsprint, and the migration of readers to the Internet caused Philadelphia Newspapers to fall out of compliance with its loan agreements last year. The same conditions have devastated the broadcast industry.
The company said it decided to turn to Bankruptcy Court after negotiating with its lenders for the last 11 months. During that time, the company was billed $13.4 million in penalty interest and fees.
It is not clear whether the current owners will retain a stake in the company if the debt is successfully restructured with the help of a bankruptcy judge. Ideally, a restructuring would reduce the amount of debt and lower the interest rate.
Citizens Bank is the agent for the senior lenders, who have included Angelo Gordon & Co., CIT Group Inc., and Wells Fargo & Co.
The Newspaper Guild, which represents newsroom and other employees of the company, alerted its members of the bankruptcy filing today.
To fund operations during the restructuring, the company asked for court approval of $25 million in debtor-in-possession financing that was arranged by NewSpring Capital in Radnor.
The Philadelphia Newspapers filing follows last month's bankruptcy filing by the Minneapolis Star Tribune. The Journal Register Co., based in Yardley and the publisher of a number of local daily and weekly newspapers, filed for bankruptcy Saturday. Just last week, the publicly traded New York Times Co. suspended its dividend to cope with the economic downturn.
The Tribune Co., which was saddled with a massive $13 billion debt load when Chicago real estate magnate Sam Zell bought it in 2007, filed for bankruptcy protection in December.