NEW YORK — The yearlong bankruptcy of Philadelphia's two largest newspapers has been a marathon affair, and Tuesday's auction to determine their next owner went off at the same slow pace.
The scheduled morning auction for the company that owns The Philadelphia Inquirer and Philadelphia Daily News had not yet gotten under way at 10:30 p.m. EDT, as lawyers for the three bidders ironed out auction rules, newspaper lawyer Larry McMichael said.
But court papers filed in the interim show that two deep-pocketed late entrants to the auction, Revlon chairman Ronald O. Perelman and his father, Philadelphia philanthropist Raymond Perelman, had committed $27 million to a local group's bid.
The closed-door auction in New York promised to be a showdown as secured lenders try to salvage some of their $318 million investment through a takeover.
Employees fear that could mean deep cuts to the newsrooms and other departments, especially after hearing in court Monday that the creditors' bid includes a guarantee to keep only half of the 4,500 full- and part-time employees.
Creditors called that disclosure by a company consultant "unfair and despicable."
They are expected to fight it out with the local investor group through long rounds of bidding.
The Perelmans' offer includes $17 million in cash and a $10 million loan, according to the document filed Tuesday.
"I'm a Philadelphian, born and bred there, and I think the paper should be owned by Philadelphians," Raymond Perelman, 92, said Tuesday from his office in suburban Bala Cynwyd, Pa. "There's people involved. There's jobs involved. The city's involved."
Ronald Perelman, whose high-profile business deals – and high-priced divorce settlements – have made headlines, did not immediately return a message.
The family's involvement came after home builder Bruce Toll, a recent chairman of the newspaper company, changed his long-standing stake in the local bid days before auction.
Toll, former public relations executive Brian Tierney and other local investors borrowed about $400 million to buy the newspaper company for $515 million in 2006. But they faced almost immediate problems as newspapers nationwide struggled to retain subscribers and advertisers amid the recession and the move by readers to free online news sites.
The company, which also owns the Philly.com web site, could be worth less than $100 million today, according to estimates from both company advisers and the creditors.
The third bidder is Stern Partners, a Vancouver-based company that owns stakes in the Winnipeg Free Press and other Canadian newspapers, along with manufacturing and other interests.
William Graham, a Philadelphia insurance broker, lost $31 million investing in the 2006 purchase, in which he had a 21 percent stake. But he said he has no regrets, and agreed to give what he called a much smaller amount this time to try to keep the newspapers from creditors.
Graham fears deep newsroom cuts would eviscerate local reporting, which he called crucial to "the health of the city." He cited the Daily News' recent Pulitzer Prize for exposing police corruption and the Inquirer's coverage of the 2006 starvation death of a disabled girl under the city's watch as examples of its value.
"Why have a newspaper if you don't have reporters?" Graham asked. "I think most of the people who were involved, and are involved, really feel that they're doing it, ... (because) it's a good cause."
Lawyers for the secured creditors group – including hedge funds Alden Capital, Angelo Gordon & Co. and the CIT Group, along with Credit Suisse bank and others – insist they want to deal fairly with employees, who now belong to 14 unions. Creditors lawyer Fred Hodara said the company was trying to manipulate the process by leaking information about the sealed bids during Monday's final pre-auction hearing in Philadelphia.
"I hope that employees in the courtroom understand what was attempted there, with respect to the very, very important employees of this company and the opportunities that are going to be available to those employees," Hodara said.
Associated Press Writer Patrick Walters in Philadelphia contributed to this report.