A federal bankruptcy judge has given the owners of the
and philly.com until Aug. 31 to file a reorganization plan to revive the company's finances.
Chief Financial Officer Richard Thayer testified yesterday that the owners were working on a plan that includes $50 million in new money for the company, about half of that from the original investors who joined with Chief Executive Officer Brian Tierney to purchase the newspapers in 2006.
Thayer estimated the company's current debt at about $500 million.
Before yesterday's ruling, the company was facing the expiration on Monday of the "exclusivity period" during which only the company's owners could advance and seek support for a reorganization plan.
Secured creditors had opposed the company's request for a 90-day extension of the exclusivity period, arguing that the company had "failed to engage in any meaningful discussions" with them about a reorganization plan.
Judge Jean FitzSimon said yesterday that she was concerned about the lack of progress toward a meeting of minds between the company and its creditors but that she'd seen similar circumstances change in other bankruptcy cases.
Attorneys for the creditors argued that the company has had more than enough time to develop its plan, and questioned whether the troubled firm was as close as Thayer suggested to raising new capital.
Spokesman Jay Devine said that the company was pleased with FitzSimon's order, and predicted a reorganization plan would be filed well before Aug. 31.
Once the company makes its proposal, it will be the only plan recognized by the court for 60 days. If there's no agreement among the parties by then, the creditors and others can propose their own reorganization plans.
The Aug. 31 deadline imposed by FitzSimon coincides with the expiration of contracts with the company's 14 unions.
Thayer said that he did not expect substantive negotiations with the unions until a reorganization plan has been filed, in part because union leaders want some assurance that the owners will remain in control before striking deals with them. *