INQUIRER: Philadelphia Newspapers L.L.C. can bar its lenders from using $300 million in debt they are owed to try to purchase the company at auction next week, a federal judge ruled today. The decision by U.S. District Judge Eduardo C. Robreno reverses a ruling by Chief Bankruptcy Judge Stephen Raslavich. Lawyers for the company’s senior lenders – which include Angelo, Gordon & Co., the CIT Group, Wells Fargo and Eaton Vance (Citizens Bank put the deal together) – had argued that it would be unfair if they had to bid cash, like other potential buyers, for property that served as the collateral for their loan. They would, in effect, have to put up money to gain control of property on which they already had a lien. They contended that the bankruptcy code gave them the right to a credit bid. The company’s lawyer, Lawrence G. McMichael, contended that so-called credit bidding by the lenders would have a “chilling effect” on other bidders and could mean the company would not receive a fair return for its sale. McMichael argued that the bankruptcy statutes included a provision for such a sale without the lenders’ having the right to credit-bid. Robreno ruled that McMichael was right, that the company’s plan, without credit bidding, would meet the requirements of the bankruptcy code by providing lenders “the indubitible equivalent” of collateral being sold. MORE
TRANSLATION: In other words, the people that loaned Tierney and Co. $318 million to buy the Inquirer/DN cannot use that still-unpaid loan as part of their bid to buy the bankrupt papers which go up for auction November 18th. Bids must be cash-only, and the judge’s ruling leaves Tierney and Co. as the highest bidder, as of this writing. Stay tuned.
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