Philadelphia Newspapers L.L.C. has postponed its auction until the Third Circuit Court of Appeals can decide if the company's senior lenders have a right to use the $318 million debt they are owed to bid for the media firm.
The federal appeals court agreed yesterday that it will hear an appeal of a lower-court ruling that denied the lenders the right to use their debt at the auction. The court also issued a stay of the auction until the appeal is heard Dec. 15. The auction, which will be conducted by the company, had been set for Nov. 25.
Lawrence G. McMichael, the company's attorney, said that Philadelphia Newspapers will voluntarily wait to hold the auction until the appeals court issues its ruling on the lenders' desire to use money they are owed, a process known as credit bidding. He said he hoped that would happen before the end of December.
"Normally, it might take four, five, or six months," he said of the typical appeals process. "But the court has agreed to put this appeal on a very, very fast track."
The auction is central to the company's reorganization plan in bankruptcy court, which calls for paying senior lenders about $67 million in cash and property to settle $318 million in debt. The company has agreed to put its assets up for auction as a way of determining whether its offer to the lenders represents a fair value.
Philadelphia Newspapers wants to bar the lenders, who include Angelo Gordon & Co., CIT Group, and Citizens Bank, from credit bidding at the auction, arguing it will drive away other bidders. The lenders have contended they have the right to credit bid.
Chief Bankruptcy Judge Stephen Raslavich ruled that the lenders did have the right to credit bid. That ruling was overturned by U.S. District Judge Eduardo C. Robreno, and the lenders appealed to the Third Circuit.
Contact staff writer Christopher K. Hepp at 215-854-2208 or chepp@phillynews.com.
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