Bankruptcy in the real world isn’t like Monopoly. In the real world, filing Chapter 11 is a way to protect a company from its creditors while reorganizing. In Monopoly, on the other hand, nobody ever reaches bankruptcy because people quit playing when they realize it’s three hours in and nobody has even built any houses yet. Sometimes it’s nice to imagine a world like Monopoly.
Ahem. By now you know the story: The owners of the Inquirer and Daily News have filed for bankruptcy. Since then, there’s been a ton of hilarious news: We learned Tierney gave himself a 42 percent raise in December, then he and two other executives who got raises — including professional sports car driver Mark Frisby — gave them back.
But there’s more! Yesterday the newspapers’ owners had their day in court. Ownership rarely, if ever, remains the same when a company files for bankruptcy, but the papers’ owners want to remain in charge, their lawyers said yesterday. Here’s the juicy details:
But lawyers for the investors who hold $297 million in debt said they were stunned that Brian P. Tierney, chief executive of the papers, had turned away from a $20 million lifeline from current lenders in favor of a loan that would protect his job, according to a court filing and testimony at yesterday’s opening hearing in Philadelphia.
Instead, Tierney and his backers lined up a $25 million loan – known as debtor-in-possession financing – from a different group that included Philadelphia Newspapers chairman Bruce Toll. It includes a provision that would put the loan in default if Tierney left the company.
There’s reason to believe this isn’t just ownership trying to save face. Obviously, Tierney doesn’t want to lose his job. But it is true that any new owners would possibly (probably? likely?) shutter the Daily News and maybe void union contracts; creditors have been pushing the papers’ owners to do this for months now. “They wanted me to stay and offered me a handsome compensation plan and a piece of the company, both verbally and in writing,” Tierney said in a statement.
Andrew Kassner, an agent for Citizens Bank, says the creditors are not looking to simply dismantle the papers and run things with a skeleton crew. He also notes, though, the company is worth less than its debt and criticized the papers for poor management.
“Most companies would have hired a crisis manager,” Kassner said. “To this company, it was business as usual.” To be fair, newspapers have been in crisis since about 1998 or so.
Kassner made it pretty clear that the creditors want Tierney out; he also attempted to sound like there wouldn’t be massive cuts if there were a bankruptcy restructuring. Tierney said afterward that “[o]nce we told them that we weren’t interested in working for them to, in effect, damage the company we love, they had a change of heart.”
So, yes, it was just a big spin session for everyone during yesterday’s hearing. The next one’s on March 9.