RENEE MONTAGNE, host:

The owners of the Philadelphia Inquirer and the Daily News are fighting to keep local control of their newspapers, despite declaring bankruptcy last year. They may find out if they succeeded later this morning. That's when the papers are scheduled to go up for auction. Joel Rose reports.

JOEL ROSE: There were dozens of U.S. newspapers in bankruptcy in 2009. But only one of them won the Pulitzer Prize for investigative reporting.

Mr. MICHAEL DAYS (Editor, Philadelphia Daily News): It indeed was pandemonium in the newsroom and it was much deserved. They earned that Pulitzer Prize.

ROSE: Michael Days is the editor of the Philadelphia Daily News. Two of his reporters won print journalism's top prize for a yearlong series of stories about a corrupt police narcotics unit.

Mr. DAYS: Sometimes you just have to know when to get out of the way. And it was clear we needed to just get out of the way. They were coming up with fantastic material. So we just let it ride.

ROSE: Days is quick to credit the paper's owners for keeping enough journalists on the payroll to�do investigative reporting. But that ownership group may not be around for long. The parent company of the�Daily News�and the Inquirer�declared bankruptcy in February of 2009. Ever since, the owners - led by a local PR man turned publisher named Brian Tierney - have been doing everything they can to keep the paper out of the hands of its creditors.

Mr. BRIAN TIERNEY (Owner, Philadelphia Daily News and Inquirer): I wouldn't be fighting like this if I lived in Philadelphia and it was a paper in another part of the country. But I am not going to hurt people in my own community. I'm not going to hurt this great institution. So I'm going to fight as hard as I can to do the right thing.

ROSE: Tierney says creditors aren't going to run the newspapers the way a journalist would. He says a hedge fund or private equity firm wouldn't think twice before cutting staff and quality to save money.]

But Poynter Institute media analyst and former Inquirer reporter Rick Edmonds says no one benefits if the newspaper fails - not even hedge funds.

Mr. RICK EDMONDS (Poynter Institute): They're definitely in it for the money, not for the public service. I mean, that much is true. I don't think it's a given, though, how they'll manage papers. Newspapers are in danger if they cut their editorial product much more.

ROSE: When the dust settles, hedge funds and other creditors will likely control a number of big metropolitan dailies that are emerging from bankruptcy -including the�Minneapolis Star Tribune and the Tribune Company, which owns�the Baltimore Sun�and the�Los Angeles Times.

Mr. JOHN MORTON (Industry analyst): It's not that all of these newspapers are losing money. They're not. They're just not making as much money as they used to.

ROSE: Veteran newspaper analyst John Morton says most newspaper bankruptcies have one thing in common: lots of debt.

Mr. MORTON: All of these companies had, when times were better, loaded up on debt to expand, in anticipation that the cash flows would continue to flow in as it always had in the past.

ROSE: Instead, those newspapers found themselves in the worst ad market since the 1930s, even as they continued to lose readers and ad revenue to the Internet.

Bankrupt newspaper owners are counting on the recovery - and lightened debt loads - to make their reorganization plans work. But University of Illinois Law Professor Robert Lawless says some of them may not make it.

Professor ROBERT LAWLESS (University of Illinois): Bankruptcy is a legal process. It doesn't make your business more viable than it was before. The bankruptcy proceeding might delay the demise. But in the end there's still - the economic forces are going to win out.

ROSE: For all the perils facing the industry, Brian Tierney seems determined to stay put at the Philadelphia newspapers. His own $10 million stake in the company is wiped out. But he's putting together a new group of local investors to bid for it.

Mr. TIERNEY: If you're willing to take a long-term view and see that this is a tough time and get it at the right price, I think it can be a decent business.

ROSE: It's a safe bet that price will be a lot less than the $500 million the papers were worth just four years ago.

For NPR News, I'm Joel Rose.

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