Philadelphia Media Holdings

Philadelphia Media Holdings LLC was an American holding company located in Philadelphia, Pennsylvania, United States. Founded by Brian Tierney in 2006, the company owned The Philadelphia Inquirer and Philadelphia Daily News. After The McClatchy Company bought Knight Ridder in 2006 it announced it would sell, among other newspapers, The Philadelphia Inquirer and Philadelphia Daily News. Interested in buying the papers, Brian Tierney assembled a group of Philadelphia businesspeople and investors to make a bid. In May 2006 Philadelphia Media Holdings bought the papers for US$515 million plus the assumption of the newspaper's liabilities. Dropping circulation and ad revenue for The Inquirer and Daily News caused financial strain resulting in the filing of Chapter 11 bankruptcy protection. The company's creditors acquired the newspapers at auction and established a new holding company, Philadelphia Media Network in 2010.

History

Founding

In 2005 media company Knight Ridder's stock dropped to US$52.42 from US$80 in 2004. This drop in stock price prompted the company's three top stock holders to pressure Knight Ridder's board of directors to sell the company to raise the price of its shares. Knight Ridder was put up for sale in November 2005, with The McClatchy Company announcing it was purchasing the company in March 2006.^[1][2] Along with the purchase, the McClatchy Company announced it was selling twelve of the least profitable Knight Ridder newspapers, including The Philadelphia Inquirer, the Philadelphia Daily News and the website Philly.com.^[3][4]

Before the announcement of the sale of Knight Ridder, Brian Tierney, the founder and former CEO of the public relations and advertising firm Tierney Communications, had expressed interest in purchasing the Philadelphia papers. After the announcement of McClathcy's plan to sell the paper's Tierney began to assemble a group of advisers and investors to purchase the papers with. Tierney formed a group of Philadelphia area investors and businesspeople to form Philadelphia Media Holdings. Almost all of the investors were either former clients of Tierney's or were with him of the board of directors of The Episcopal Academy. While Tierney found investors Citizens Financial Group's president Stephen Steinour arranged financing. Working with Tierney a month before they even knew if the Philadelphia paper's would be for sale, Steinour arranged US$450 million in financing from Citizens Financial Group's owner the Royal Bank of Scotland.^[4]

Competing with Onex Corporation, Yucaipa Cos., Avista, and Daily News L.P. for the Philadelphia newspapers, Philadelphia Media Holdings submitted its bid on May 16. On May 17 Tierney was told Philadelphia Media Holdings had the best bid, but they needed more money. After two days of negotiations, on May 19 McClatchy chairman Gary B. Pruitt told Tierney they had a deal. The deal was announced May 23, Philadelphia Media Holdings paying US$515 million and the assumption of the paper's liabilities including US$47 million in pension liabilities.^[4]

There was excitement that The Philadelphia Inquirer and the Philadelphia Daily News would be under local ownership for the first time since Walter Annenberg sold the paper to Knight Newspapers in 1969. The buyout was also met with skepticism at The Inquirer who feared the new owners might threaten the editorial independence of the newspaper. Concerns were especially directed to Brian Tierney who has in the past criticized Inquirer reporters doing negative stories about his clients during his time at Tierney Communications.^[5] Tierney allayed fears by having the members of Philadelphia Media Holdings sign a pledge not to interfere with the paper's editorial independence. Tierney said he would combat The Inquirer's decreasing revenue and circulation by spending millions on advertisements and promotions and not by laying off staff.^[6][7]

Bankruptcy

The Philadelphia Inquirer's and Philadelphia Daily News' circulation has been steadily dropping years before Philadelphia Media Holdings bought the papers. In 2007 The Inquirer's weekday circulation slightly rose, however its Sunday circulation continued to drop. The rise in circulation was only temporary and the newspaper's circulation has since continued to fall.^[8][9] Not helping the financial situation is the unexpected large drop in advertisement revenue.^[10][11] To help cut cost and repay debt Philadelphia Media Holdings cut jobs at The Philadelphia Inquirer in January 2007, and again at The Inquirer and the Daily News in February 2008.^[10][12]

On June 1, 2008 Philadelphia Media Holdings missed its interest payment on US$85 million in junior loans. Philadelphia Media Holdings missed the payment because it didn't maintain debt-to-cash flow ratio its senior lenders required so they blocked the payment. The company began negotiations with its lenders to restructure its debt and in October 2008 Philadelphia Media Holdings deferred paying its interest payment despite having the money to do so.^[11][13][14] Charged $13.4 million in penalty interest and fees, Philadelphia Media Holdings continued negotiations with lenders until February 20, 2009 when the talks collapsed. Late the next day Philadelphia Newspapers LLC, the subsidiary of Philadelphia Media Holdings that owns the papers, filled for Chapter 11 bankruptcy protection.^[15] Philadelphia Media Holdings hoped to restructure its US$390 million in debt it incurred when buying the newspapers.^[16]

The bankruptcy declaration was the beginning of a year long dispute between Philadelphia Media Holdings and creditors. The group of creditors, which include banks and hedge funds, wanted to take control of Philadelphia Newspapers LLC themselves and oppose efforts by Philadelphia Media Holdings to keep control. Philadelphia Media Holdings received support form most of the paper's unions and launched a public relations campaign to promote local ownership.^[17] A bankruptcy auction was held on April 28, 2010. The group of lending creditors and a group of local investors allied with Brian Tierney both bid for Philadelphia Newspapers, but the lenders had the winning bid.^[18] On May 21 Brian Tierney stepped down as CEO of the Philadelphia Media Holdings and was replaced by Joseph Bondi, the company's restructuring adviser.^[19]

The deal fell through after the group of lenders, under the name of Philadelphia Media Network, was unable to agree on a contract agreement with the union representing the company's drivers.^[20] The papers went up for auction again in September with Philadelphia Media Network competing with Raymond Perelman, father of Ronald Perelman. Philadelphia Media Network again won the auction and, after successfully negotiating a contract with the all of the papers' fourteen unions, the US$139 million deal became official on October 8.^[21][22]

Publications

Philadelphia Media Holdings owned and published Philadelphia, Pennsylvania, United States two major morning daily newspapers, The Philadelphia Inquirer and Philadelphia Daily News.^[5] The company also published three suburban weeklies, The Trend, the Northeast Times, and Star Publications.^[23] The magazine publishing division of The Philadelphia Inquirer was called Broad Street Magazines and published six magazines. The magazines were Home & Living, Adult 55+, Beach & Bay, My Wedding, Communities, and Phillycars.^[24]

References

1. ↑ "Knight Ridder shareholders approve sale to McClatchy". The Associated Press. June 26, 2006. Retrieved 2008-10-18. no 
2. ↑ Wilkerson, David B. (June 26, 2006). "Knight Ridder shareholders OK sale to McClatchy". MarketWatch. Retrieved 2008-10-18. 
3. ↑ "Knight Ridder bought for $4.5bn". BBC News. March 13, 2006. Retrieved 2008-10-18. 
4. 1 2 3 DiStefano, Joseph N.; Larry Eichel (May 29, 2006). "How a long shot won the bidding for The Inquirer". The Philadelphia Inquirer. Retrieved 2008-10-18. no 
5. 1 2 Smolkin, Rachel (August–September 2006). "Life with Brian". American Journalism Review. Retrieved 2008-10-18. no 
6. ↑ Dilanian, Ken (May 24, 2006). "Frequent critic of media takes newspapers' helm". The Philadelphia Inquirer. no 
7. ↑ Leonard, Devin (November 13, 2006). "A PR magnate struggles to revive a newspaper". Fortune. Retrieved 2008-10-18. no 
8. ↑ "Good news/bad news for Inquirer circulation". Philadelphia Business Journal. November 5, 2007. Retrieved 2008-10-19. no 
9. ↑ "Inquirer circulation slips". Philadelphia Business Journal. April 28, 2008. Retrieved 2008-10-19. no 
10. 1 2 Loviglio, Joann (January 3, 2007). "Philadelphia Inquirer lays off 71 people". BusinessWeek. no 
11. 1 2 "Philadelphia Papers Miss an Interest Payment, Again". Associated Press. October 7, 2008. Retrieved 2008-10-19. no 
12. ↑ "Philadelphia Inquirer, Daily News owner cuts 68 jobs". Philadelphia Business Journal. February 27, 2008. Retrieved 2008-10-19. no 
13. ↑ "Reports: Phila. Inquirer owner misses interest payment". Philadelphia Business Journal. June 6, 2008. Retrieved 2008-10-19. no 
14. ↑ "Report: Inquirer, Daily News owner defers interest payment". Philadelphia Business Journal. October 7, 2008. Retrieved 2008-10-19. no 
15. ↑ "Philadelphia Media Holdings Chapter 11 Petition" (PDF). PacerMonitor. PacerMonitor. Retrieved 9 June 2016. 
16. ↑ Pérez-Peña, Richard (February 22, 2009). "Philadelphia Newspapers Seeking Bankruptcy". The New York Times. Retrieved 2009-02-24. no 
17. ↑ Denvir, Daniel (September 3, 2009). "Local Flavor". Columbia Journalism Review. 
18. ↑ Hepp, Christopher K.; Harold Brubaker (April 28, 2010). "Phila. Newspapers sold to lenders". The Philadelphia Inquirer. Archived from the original on September 13, 2010. 
19. ↑ "Phila. newspapers' leader Tierney announces exit plan". Philadelphia Business Journal. May 14, 2010. Retrieved 2011-05-14. 
20. ↑ Van Allen, Peter (September 15, 2010). "Sale of Inquirer, Daily News voided, new auction date set for Sept.". Philadelphia Business Journal. Retrieved 2011-05-11. 
21. ↑ Church, Steven (September 24, 2010). "Philadelphia Inquirer Lenders Beat Perelman in Court Auction". Bloomberg Businessweek. Retrieved 2011-05-11. 
22. ↑ "Meet the New Boss: Philly Newspapers Sale Finally Completed". Editor & Publisher. October 8, 2010. Retrieved 2011-05-11. 
23. ↑ "Suburban Weeklies". Philadelphia Media Holdings. Retrieved 2008-10-19. 
24. ↑ "Broad Street Magazines". Philadelphia Media Holdings. Retrieved 2008-10-19.