The Daily News and Inquirer are going back on the auction block next week, after a potential sale to a group of hedge funds collapsed yesterday under opposition from Teamster delivery drivers.
Federal bankruptcy Judge Stephen Raslavich ordered a new auction in his courtroom a week from tomorrow, without any contingencies for labor agreements.
Greg Osberg, chief executive of the hedge-fund consortium that agreed last April to pay $105 million in cash for the newspapers, said the group intended to bid and prevail again, this time with more clout to deal with the balking Teamsters.
But sitting in the front row of the bankruptcy court was another potential bidder, 92-year-old Raymond Perelman, a wealthy Philadelphia businessman and philanthropist who was part of an unsuccessful bidding group in April.
Perelman and his attorney, restructuring expert J. Gregory Milmoe, from the New York megafirm Skadden, Arps, Slate, Meagher & Flom LLP, were coy about their interest in next week's auction.
"Let's see what all the [legal] papers say," Perelman told a reporter.
Raslavich had set a deadline of noon yesterday for Osberg's group, known as Philadelphia Media Network, to close a deal for ownership of the two daily newspapers and their website, Philly.com.
The group included 16 financial institutions led by Angelo, Gordon & Co., Credit Suisse and Alden Global Capital.
But their deal was contingent on their reaching contracts with all 15 of the newspapers' collective bargaining units. Over the past two months, 14 of the unions agreed to various concession packages, but Teamsters Local 628, representing delivery-truck drivers, voted twice to reject its contract proposals, angry at proposed changes in their pension arrangements.
"We're disappointed," Osberg said yesterday. "We came very close, 14 out of 15 unions. . . . We thought we might be able to get this thing over the finish line at the very last moment, and we didn't have the opportunity to do that."
Raslavich said the next auction would have no contingencies for labor agreements, requiring the winning bidder to close the deal by mid-October or forfeit a significant chunk of its bid - 15 percent, according to attorneys involved in the bankruptcy case.
At a news conference Monday and again yesterday, Osberg suggested that the rules for the new auction would strengthen the bargaining position of the winning bidder by allowing it to impose working terms and conditions on any unions that refused to sign contracts.
Teamsters Local 628 President John Laigaie led a group of more than 100 drivers who crowded the sidewalk outside the bankruptcy court, at 9th and Market streets, and carried signs denouncing hedge-fund ownership of the newspapers.
Laigaie said that he was pleased with the judge ordering a new auction.
"We knew that if they had closed the deal today we would have been without our pensions," Laigaie said. "This plan gives us another month and a chance to fight again if we have to. . . . We are willing to make concessions and do the right things to help the company, but don't tell us the right way to run our pension plan."
Philadelphia Media Network had offered to make contributions into workers' individual 401(k) plans but said it would cease making payments into any of the unions' defined-benefit plans.