• by Erik Sass  @eriksass1, October 11, 2010

As the much larger Tribune bankruptcy drifts toward the shoals, the bankruptcy case involving The Philadelphia Inquirer and Daily News has finally ended with a finalized sale to creditors who will take possession of the papers, along with the Web site Philly.com, from their former owners by June 2011.

The sale was finalized a week after the owners announced they have hammered out agreements with all the unions employed by the newspapers -- the last major hurdle before the deal could close.

The properties, which previously comprised Philadelphia Newspapers, LLC, are being reorganized in a new company called Philadelphia Media Network, led by publisher and CEO Gregory Osberg, a former president and publisher of Newsweek, and COO Robert J. Hall, who was publisher of the two Philly newspapers from 1990-2003.

The news follows contentious legal proceedings, which at times seemed doomed to the same indecisive fate as Tribune's. The outcome of the battle for ownership of the newspapers was up in the air until the April auction, in which senior lenders -- including Angelo, Gordon Co., Alden Capital and Credit Suisse -- stumped up $69 million in cash equity for the newspapers, as well as $39.2 million in debt and an estimated $30 million from the company's real estate value, for a total sale price of $139 million.

This beat a combined bid totaling $129 million (including the value of the real estate) from a group composed of the current owners as well as new local investors, including construction magnate Bruce Toll, cable mogul H.F. Lenfest and Ronald Perelman, the chairman of Revlon.

The list of would-be local investors also included David Haas, the heir of the Rohm & Haas chemical company fortune, William Graham, an insurance broker, and the Carpenters Union Pension Fund. The company continues to carry about $36 million in debt -- a dramatic improvement from the $390 million in debt it carried from the ill-fated buyout organized by Philadelphia PR and ad mogul Brian Tierney in 2006, when local investors bought the newspapers from McClatchy Co. following its acquisition of the defunct Knight Ridder newspaper empire.

The rapid decline in the newspaper industry, combined with the broader economic downturn, pushed the new owners into insolvency in February 2009, forcing them into a second, losing fight for control of the newspapers.