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Philadelphia Newspapers are Bankrupt- Now What?

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The following article is an opinion piece. Although approved by the management of Philly2Philly.com, it does not necessarily reflect the opinions of the management, employees, or founders of Philly2Philly.com

 

Brian Tierney is desperate.

As head of Philadelphia Media Holdings LLC (the company that bought Philadelphia Newspapers LLC from McClatchy in 2006), he really wants to keep his newspapers. So much so, he’s taken a page out of his public relations playbook to keep the big bad out-of-towners from taking it away.

He’s created a campaign slogan of sorts. And it’s got all the signs of a winner: It’s ambivalent, insulting, and community driven: “Keep It Local!” But can three words make up for three years of failed management?

Normally, I’d say this dude doesn’t stand a chance at retaining the company after bankruptcy filings (in which he’s proposing new local investors to come in with fresh money and repay his original debt to the original creditors for 23 cents on the dollar), but stranger things have happened, and Tierney has proven himself as a master of deal making deception over the years.

Before buying the Philadelphia Inquirer and serving as both publisher and chief executive, Tierney ran several public relations firms in the Philadelphia area. He became known for spreading misleading accusations on behalf of his clients against, as fate would have it, Philadelphia Inquirer reporters. In 1997, the former Reagan administration staffer ceaselessly and publicly accused Inquirer religion reporter Ralph Cipriano of having an agenda against his client, the Roman Catholic Archdiocese of Philadelphia. He claimed Cipriano used inaccurate facts, trespassed, and deliberately incited a protest in his reporting on Cardinal Anthony Bevilacqua.

Because of Tierney’s lobbying efforts and intimidation toward the Inquirer’s editor, Cipriano’s piece was not published in full by the Inquirer and after a lawsuit accusing the Inquirer of censorship, an out of court settlement ensued. Cardinal Bevilacqua would tell Editor and Publisher Magazine in 2001 that Tierney helped stop the story and the Inquirer has since reported in a more positive manner.

Tierney then worked on George W. Bush’s 2000 presidential campaign. “With the adman's help, Bush tallied almost two million more Catholic votes than Bob Dole got in 1996, leading to victories in key states like Ohio and Missouri,” Philadelphia Magazine wrote in a 2001 profile. “Even more significantly, Tierney played a pivotal role, maybe the pivotal role, in Florida.”

After becoming CEO of the Inquirer, Daily News, and Philly.com, the American Journalism Review interviewed a still incensed Cipriano for its 2006 profile on Tierney. He said of his former foe: “He doesn't understand what we do. He doesn't respect what we do, and he doesn't think we should be doing it... I don't see how a guy like that can run a newspaper and not just turn it into another extension of the spin machine.”

Tierney signed a pledge with the members of Philadelphia Media Holdings promising he would not get involved in the Inquirer’s editorial independence. Since the purchase, however, both former Senator Rick Santorum and Bush Administration torture advocate John Yoo have earned regular spots on the Inquirer’s editorial page.

Ads promoting the local plea of the news organization have been running in both papers, on Philly.com, and are pasted on delivery trucks. It has the subtle stench of a right wing smear and fear campaign, promising that owners from places outside Philly will axe the Daily News and strip the Inquirer down to Metro-level. “Banks and hedge funds located in New York,” one ad says, “Beverly Hills and elsewhere,” – will send coverage and staff into oblivion.

The promise likely comes with the hope that local readers and residents have forgotten that Tierney cut nearly 400 of the company’s 2,600 full-time jobs, persuaded unions to ease work rules, replaced most of the ad-sales staff and ended cut-rate subscriptions since taking over, according to the Wall Street Journal. Tierney’s own pay has been raised 38% since the initial buy, to $850,000 (after demanding a 10% cost concession from his workers), according to Forbes.com. Tierney also took a $350,000 bonus right before filing bankruptcy back in February. According to Philadelphia Weekly, $50,000 was paid through the newspapers to a marketing company co-owned by Tierney’s son, Brian Tierney, Jr. PW also found that junior’s entrepreneurship was actually “an online marketing company that, bizarrely, didn’t have a website of its own.”

But all that might not matter as Tierney strives to “Keep it Local.” A committee for some of the newspapers’ creditors sees this as a classic publicity campaign, a plot by Tierney to make it more difficult for anyone besides Tierney’s LLC to even want to compete. “The debtors have attempted to poison the prospects for any competing bidder ... with the debtors' unionized work force, with advertisers and with the community. This is the antithesis of what the law requires,” the committee said on September second.

It has been suggested by some, according to the Associated Press, that the real target is U.S. Bankruptcy Judge Stephen Raslavich, even though his opinion is not theoretically swayable. John Morton of Morton Research also told the AP, concerning the idea that Raslavich may think locally before acting globally because of the campaign: "It's a shot in the wind. But it certainly won't hurt."

Judge Stephen Raslavich must approve the winning bid by November, with bids due October 22. Tierney’s bid is asking he buy out the creditors that loaned him and Philadelphia Media Holdings, LLC $400 million, for 23 cents on the dollar. He would bring in new investors, including Bruce Toll, co-founder of homebuilder Toll Brothers Inc. and a carpenters' union pension fund. They would invest $35 million of fresh cash into the sinking papers (which were bought for $515 million back in 2006, but today are worth about $100 million, according to estimates) and debt would be erased.

In exchange for erasing the debt, the local plan would give creditors a package worth $92 million – $37 million in cash, $30 million in real estate (which allegedly includes the Inquirer building), and $25 million needed to exit bankruptcy. The original creditors would take no stake in the reorganized company.

Tierney admitted to the AP that although “local ownership alone is not a panacea,” local owners care more about local news coverage and the community than national investors would. Governor Rendell has tried to stay neutral, but his press secretary said of the situation: “Local ownership is preferable if it is doable.”

Is it doable? Probably not, but stranger things have happened.

 

photo: www.phillyimc.org