What’s Next After Goliath Beats David in Philly Newspapers Fight

Even bringing on board four public-spirited millionaires, a union and one of his first-round investors who had lost his original stake, Philadelphia Media Holdings CEO Brian Tierney couldn’t outbid a consortium of distressed debt specialists for the Inquirer and Daily News.
 
But he put up a heck of a fight.
 
In the current spate of newspaper bankruptcies, it is a given that the original shareholders will lose everything or nearly so. Most often, ownership passes to senior lenders, and unsecured creditors get pennies on the dollar. So, the result makes sense.
 
Still, Tierney broke the mold, fighting the likely outcome from the get-go with every disposable cudgel, from charges of secret tapings to full-page ads trashing the bankers to whom he and his partners had defaulted.

While there may have been a Music Man flavor to some of his stunts, Tierney twice brought together locals willing to invest in the local public service mission of a newspaper organization, knowing they might never see a dime in return — a plenty tough sell in the first decade of the new century.

 
Public service mission and principled, aggressive journalism are not the currency of bankruptcy court, however. It’s all about money, and of course, Wall Street has more.
 
The code of silence among the coalition of distressed debt specialists acquiring The Philadelphia Inquirer and its sister Daily News, suggests we are unlikely to get a clear statement of why they see opportunity in the papers or what they plan. It’s a case, as Nixon Attorney General John Mitchell put it, of “watch what we do.”
 
Cuts — most likely deep ones — are in the offing, perhaps too a nasty slug-it-out with the papers’ unions. But then the bankers are going to need to settle in with a game plan to develop what’s left of their asset.

One of the lead firms, Angelo, Gordon & Co. of New York, is also lead in the group that took over the Star Tribune of Minneapolis and, more recently, Freedom Communications in Orange County, Calif. But little can be surmised from their brief time at the helm.

 
Searching for silver linings in Wednesday’s news, the winning bid of $105 cash suggests an upturn in the industry’s prospects from a year ago — though of course it is only about a fifth of what Tierney’s group paid in 2006.
 
I’m hardly dispassionate about what stands to be lost journalistically at the Inquirer and Daily News. I’m an alum from the Gene Roberts era. Editor Bill Marimow and local news chief Vernon Loeb are long-time close friends, and I have come to admire Tierney’s candor and commitment.
 
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I believe the Biz Blog sounded the first warning (on a tip from Tierney) that Angelo, Gordon had its tentacles in multiple bankruptcies and could end up calling the shots at newspapers in a half-dozen of our biggest cities. (You may be next, Los Angeles and Chicago).

 
Now the era of bankers as owners is here in practice, not just in theory. It is unfair to type-cast them as greedy idiots who will trash what is left at these once-proud, now battered institutions. Frankly, though, I’m scared.

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