The US Third Circuit Court of Appeals has agreed to hear an appeal of a lower court order that barred creditors of the Philadelphia Inquirer and Daily News from credit bidding at a bankruptcy auction. That puts a hold on any auction taking place until after the appeal is heard in December.
The senior lenders of Philadelphia Newspapers LLC had wanted to use the $318 million they’re owed to bid in the auction, which is routine in Chapter 11 cases. But the newspaper company, which was acquired in 2006 by local investors led by Brian Tierney, persuaded the bankruptcy judge to allow only cash bids.
The creditors had appealed the judge’s ruling to a US District Court, which also denied the creditors the right to use credit bidding. Now the federal appeals court will weigh in before any auction takes place.
Absent a successful auction bid, Philadelphia Newspapers LLC has proposed a reorganization which would pay creditors about $67 million in cash and property to wipe out the $318 million of debt.
RBR-TVBR observation: First Chrysler and General Motors. Now the Philly newspapers. If the courts keep screwing creditors, who will want to step up in the future to assume the risk of lending?