Judge Deals Setback for Philadelplhia Newspapers Management in Bankruptcy Motion

By: E&P Staff

Lawyers for Philadelphia Newspapers LLC are appealing a judge’s refusal to order the company’s largest creditors to detail the value and amount of the debt each owns.

As reported Friday by Philadelphia Inquirer staff writers Andrew Maykuth and Christopher K. Hepp, Chief Bankruptcy Judge Stephen Raslavich rejected the request by the parent company of the Inquirer and Philadelphia Daily News to determine what the bankrupt company’s $318 in secured debt is actually worth.

The issue is part of a long-running dispute between Philadelphia Newspapers and a steering committee of its largest creditors, who would like to bid on the newspaper assets using its debt in what’s called a credit bid. The papers’ management contend that would deter other bidders who would have to put up their own money in an auction.

Philadelphia Newspapers said 36 potential bidders had signed nondisclosure agreements to review its books in preparation for the auction to be held later this year.

The Inquirer reported that a year ago, when Philadelphia Newspapers first filed for bankruptcy, a lawyer for the creditors group said the debt was trading at about 20 cents on the dollar, that would give the $318 million in debt a value of about $64 million.

A group of investors led by Brian Tierney, now Philadelphia Newspapers CEO, bought the papers from The McClatchy Co. in 2006 for $515 million, almost all of it borrowed.

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