Judges: Auction papers as scheduled

A request to delay the April 27 auction that will decide the new owners of the Daily News and Inquirer was rejected late yesterday by a federal appellate panel - hours after the papers' current owners warned of a looming cash crunch.

The three-judge panel of the U.S. Third Circuit Court of Appeals denied the request by the newspapers' biggest lenders to postpone the auction in which the newspapers would be sold to the highest cash bidder.

"This is a very positive development from the standpoint of the debtors," said Lawrence McMichael, attorney for the current owners. "It reflects a sense from the Court of Appeals that enough delay is enough. Bankruptcy cases have to keep moving and they have to end."

The senior lenders are a group of hedge funds and other financial institutions that hold more than half of the newspaper company's secured debt, valued at $318 million.

They want all 13 active judges on the Third Circuit to review a divided 2-1 opinion issued two weeks ago by a three-judge panel. Late yesterday, the appeals court said it would "expedite" its decision on that request.

The same three jurists who ruled 2-1 against credit bidding on March 22 also ruled 2-1 against granting a stay while the Third Circuit considers rehearing the case.

The ruling came after the chief executive of the parent of the two newspapers and Philly.com warned at a news conference that the company could run out of money in mid-July if there are further delays in its Chapter 11 bankruptcy case.

"If it's delayed even a week or two, there's a fear we're going to run out of cash and there's a fear that this 181-year-old company will suffer because of the delay," said Brian Tierney, chief executive of Philadelphia Media Holdings.

The lenders' lead attorney, Fred S. Hodara, replied pointedly to a suggestion by Tierney yesterday that the lenders had reneged on a promise not to seek to have the auction delayed.

Said Hodara by e-mail: "Here's a broken promise: [Tierney] borrowed $400 million to finance his acquisition of the company and is now doing everything he can to dishonor the desires of those to whom he made the promise to repay those obligations."

Efforts to reach Hodara for a comment on the ruling last night were unsuccessful.