Philadelphia Newspapers L.L.C.'s senior lenders have asked a federal judge to halt a pending auction of the company while they appeal a ruling barring them from bidding the debt they are owed.
If the auction goes forward as planned next Wednesday and before the appeal is resolved, the lenders contended in documents filed late yesterday, they "will thus have lost the opportunity to protect the value of their collateral" - the company - which they pegged at $318 million.
The request was made to U.S. District Judge C. Eduardo Robreno, who ruled yesterday that the senior lenders - which include Angelo, Gordon & Co., the CIT Group Inc., and Eaton Vance Corp. - did not have the right to bid their debt at the auction, a procedure known as credit bidding.
The auction is central to Philadelphia Newspapers' reorganization plan, which calls for paying the senior lenders about $67 million in cash and property to settle the $318 million in debt.
The auction is designed to see whether that offer represents a fair-market value for the company, which owns The Inquirer, the Philadelphia Daily News, and Philly.com.
Bids for the company are due Monday.
An opening bid has been established by a group of three local investors, who, as part of the company's reorganization plan, have put up $35 million and a $17 million letter of credit in their effort to buy the media firm.
A portion of the investors' purchase price would be used to provide cash to be given to the lenders as part of the $67 million debt-settlement deal.
Constituting that group are Bruce Toll, vice chairman of Toll Bros. Inc.; the Carpenters Union pension fund; and philanthropist David Haas. Toll and the pension fund were among the investors who bought the company in 2006.
Philadelphia Newspapers filed for Chapter 11 bankruptcy protection in February.
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