Court nixes review in Philadelphia Newspapers case

* Court clears the way for cash-only auction

* Auction might be held in April

By Tom Hals

WILMINGTON, Del, April 9 (BestGrowthStock) – Secured lenders of
Philadelphia Newspapers LLC were dealt a setback on Friday in
their attempt to take control of the city’s leading daily
newspapers without putting up any more money.

The lenders, including Citizens Bank, were denied a request
to have a U.S. Appeals Court rehear a decision barring them
from using $318 million they are owed (known as credit bidding)
as their bid for the Philadelphia Inquirer and Daily News.

The decision clears the way for the company to hold an
auction with cash-only bids. Philadelphia Newspapers has argued
that bids must be in cash to determine the market price of the
business. Secured lenders could still bid in cash.

A spokesman for Citizens Bank said it was reviewing its
options.

Philadelphia Newspapers said it was “extremely pleased”
with the decision. “It is time to stop these endless appeals
and stop wasting the company’s money on new law firms,” the
company said in a statement.

“The lenders are now 0-4 and have been turned down by
almost every Third Circuit judge available to vote on the
matter. They are running out of judges to tell them no.”

Critics of the “cash only” bidding have said it could
strengthen the hand of bankrupt companies that want to have
added leverage with secured creditors. The dissenting judge in
the original Appeals Court ruling warned it could raise the
cost of credit.

The outcome of the battle will determine whether the
newspapers are run by a group of banks or investors with ties
to Brian Tierney, the publisher’s chief executive.

Tierney, a Philadelphia advertising executive, bought the
newspapers from The McClatchy Company and presided over them as
their revenues declined and they were forced to file for
bankruptcy protection.

Tierney often has equated his fight to keep control of the
newspapers with the fight to preserve strong local journalism
in the Philadelphia area, even as newspaper companies around
the country struggle to retain a local presence.

APRIL AUCTION?

Unless the U.S. Supreme Court gets involved, an auction
could be held later this month.

The company received an initial bid of $67 million last
August from real estate developer Bruce Toll and his group of
Philadelphia-area investors. Toll’s proposal will now be
subject to higher bids, which must be in cash.

Toll was part of the group of investors who backed
advertising executive Brian Tierney’s takeover of the
publishing company in 2006.

The bankruptcy case is In re Philadelphia Newspapers LLC,
U.S. Bankruptcy Court, Eastern District of Pennsylvania, No.
09-11204.

The Appeals Court case is In re Philadelphia Newspapers
LLC, U.S. Court of Appeals for the Third Circuit, No. 09-4266.

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Court nixes review in Philadelphia Newspapers case