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Would-Be Saviors Of Philly Papers Need Saving; Philadelphia Media Holdings Files For Chapter 11

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A bad weekend for papers in the Philadelphia area and publishing companies in general … Saturday, the Journal Register Co (OTCBB: JRCO). filed to reorganize under Chapter 11. Philadelphia Newspapers, Inc., owner of the Philadelphia Inquirer, the Philadelphia Daily News and, followed suit Sunday. Philadelphia Media Holdings bought the former Knight Ridder papers from *McClatchy* in 2006 for $562 million — $515 million in cash. CEO Brian Tierney, who led the local investment group that planned to show how newspapers could be saved, insisted in the press release (via that the company’s operations are “sound and profitable” but that the filing was needed to deal with $390 million in debt.

What this means for the ownership group is unclear. The company is asking the court to approve $25 million in debtor-in-possession financing arranged by Philadelphia-area NewSpring Capital. Tierney: “In the last two years, we experienced the rare trifecta of a dramatic decline in revenue, the worst economic crisis since the Great Depression and a debt structure out of line with current economic realities.”

Guild memo: The Newspaper Guild alerted its members Sunday evening by e-mail; a version is posted at “As hard as it may sound, please stay calm. The company is still in business, the papers are still publishing and you should still report for work.” The key talking points after that: “Our contract remains in full force; your wages and benefits will continue to be paid; we retain the right to grieve and arbitrate contract disputes; and no unilateral changes to our contract can be implemented without prior negotiations.”

Update: AP: “The filings reiterate that the newspaper company hopes to reconfigure its debt rather than restructure its operations. The company was profitable by one accounting measure last year, earning $36 million before interest, taxes, depreciation and amortization, and excluding one-time items. That figure is expected to be at least $25 million in 2009.”