Philadelphia Newspapers creditors object to disclosure statement

By Angela McDaniels

Tacoma, Wash., Oct. 23 - Philadelphia Newspapers, LLC's official committee of unsecured creditors objected to the company's disclosure statement in a Friday filing with the U.S. Bankruptcy Court for the Eastern District of Pennsylvania.

The committee said the disclosure statement does not contain adequate information concerning aspects of the plan that creditors need to make a decision and that it fails to comply with many of the most basic requirements of the bankruptcy code.

The disclosure statement does not include basic information about unsecured claims or the likely recoveries for unsecured creditors, according to the committee.

The statement contains "numerous factual errors" and a "biased history" of the company's operations that "attempts to recast history in a manner that leaves the reader with the impression that the group led by Mr. [Brian] Tierney organized a purchase of the debtors in mid-2006 in order to benefit the City of Philadelphia and in the process turned around two struggling newspapers," the committee said.

Tierney is the company's chief executive officer, and the committee said he was "prominent in championing" the bid of stalking horse bidder Philly Papers, LLC and arranged the formation of Philly Papers.

The company has characterized the proposed sale of substantially all of its assets to the stalking horse bidder as a fight to "keep it local," but in fact it is "manifestly an insider transaction," according to the committee.

The committee also noted that the disclosure statement, which was filed in August, does not include many recent events, such as the Oct. 8 court decision to deny the company's motion to pay a break-up fee to the stalking horse bidder and the Oct. 12 receipt of final approval of the debtors-in-possession financing.

Philadelphia Newspapers, based in Philadelphia, owns the Inquirer, the Philadelphia Daily News and Philly.com. The company filed for bankruptcy on Feb. 23, 2009, and its Chapter 11 case number is 09-11204.

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