After leading an investment team to buy The Philadelphia Inquirer in 2006, Brian P. Tierney invited the widow of its onetime owner, Walter Annenberg, to visit him in her husband's old office. While visiting, Lenore Annenberg noted that Tierney had situated his desk differently from her husband.
Tierney moved his desk. "I want all the good vibes, good ideas, I can get," Tierney told Philadelphia magazine.
This week, the Phillies are enjoying the good vibes, but time and luck are running out for Tierney, who, like newspaper publishers everywhere, has been hit by declining advertising revenue amidst the worst economic slowdown in memory. His company, Philadelphia Newspapers LLC, filed for Chapter 11 bankruptcy in February: a startling turnabout for a man hailed as a savior when he bought The Philadelphia Inquirer, the scrappy tabloid Philadelphia Daily News, and related properties for $515 million.
With infectious enthusiasm, Tierney vowed to restore the papers, to their full, Pulitzer-winning glory. He promised not to interfere with the editorial operations, unlike his precdecessor, Annenberg. (The Inquirer did raise some eyebrows when it published its 2008 endorsement of Barack Obama alongside the publisher's "anonymous" dissenting opinion.) "I think the only mistake he made was paying way too much," says Rick Edmunds, media business analyst at the non-profit journalism think tank Poynter Institute.
One group that hasn't succumbed to Tierney's charms is his creditors -- including Citizens Bank, CIT Group (CIT), and Angelo, Gordon & Co. -- who have accused him of stiffing them on loan payments while giving himself a 38 percent raise before declaring bankruptcy. (Philadelphia Newspapers owed $400 million when it went bankrupt.) Tierney responded to their legal challenges with a PR campaign to keep the papers in "local hands" and has said one of his creditors illegally taped his conversations.
The bankruptcy judge on the case, who has noted its unusual acrimony, ruled this month that creditors can bid for the papers with the amount of money they're owed, meaning they can grab control of Philadelphia Newspapers without spending any additional cash. The ruling, a Tierney spokesman says, presents a serious obstacle to keeping the papers' control under current management.
This week, Tierney got three large investors calling themselves Philly Papers LLC to pony up an additional $20 million note payable to the senior lenders, and to agree to share 50 percent of the company's cash flow after taking into account certain obligations of the company, according to a statement from Philadelphia Newspapers L.L.C. That's in addition to the $67 million in cash, credit, and real estate the group had previously pledged in a reorganization plan to bring the newspapers out of bankruptcy.
Philly Papers is comprised of Philadelphia Newspapers chairman Bruce Toll, a member of the family that runs luxury homebuilder Toll Brothers (TOL); philanthropist David Haas, scion of the family that founded chemical company Rohm & Haas, which Dow Chemical Co. (DOW) bought in April for $15.7 billion; and the Carpenters Union Pension Fund, one of the most politically powerful labor groups in Philadelphia.
But even such powerful friends might not be enough to save Tierney's empire. The creditors will discuss the offer Friday with Tierney, who hopes to persuade his lenders to take a fraction of what they're owed instead of the whole company. One source close to the case expresses skepticism that the lenders will take the deal, given Tierney's antagonizing in recent months.
The door is not shut entirely for Tierney, says Jonathan Lipson, a Temple University law professor who expects the bankruptcy judge to give Tierney a fair amount of leeway. But Edmunds at the Poynter Institute puts the odds of Tierney's victor at less than 50/50: "They may simply have too much financial muscle."
Bonds for Beginners
Learn about fixed income investments.View Course »