Philadelphia Newspapers L.L.C. yesterday asked a federal Bankruptcy Court judge to force the company's largest debt holders to give a full accounting of the debt each owns and how much was paid for it.
The company contends that the information is important in determining the true value of its $318 million secured debt and a fair price to settle it.
Senior lenders counter that the request is a ploy to intimidate some lenders from participating in a forthcoming auction of the company.
Chief Bankruptcy Judge Stephen Raslavich heard testimony on the request but delayed a ruling until both sides could file further briefs on the issue.
The company, which owns The Inquirer, the Philadelphia Daily News, and Philly.com, is specifically seeking details on the debt owned by the seven lenders who make up what is known as the Steering Group of Prepetition Lenders. The group, by definition, is made up of the largest lenders, who together control more than 50 percent of the company's debt.
Currently, that group is comprised of Angelo, Gordon & Co., CIT Syndicate Loan Group, Credit Suisse Candlewood Special Situations Fund Ltd., Credit Suisse Loan Funding L.L.C., Eaton Vance Management, General Electric Capital Corp., and McDonnell Investment Management.
Lawrence G. McMichael, the newspaper company's attorney, argued in a brief filed with the court that bankruptcy rules require that the lenders who make up the steering group give a full accounting of their debt holdings.
At the hearing, Scott Baker, general counsel for the company, testified that at least $30 million in company debt had traded hands since late October.
McMichael, in an interview after the hearing, said knowing how much the debt was trading for could go a long way toward determining if the company's current offer to lenders is a fair one.
In February, when the company filed for bankruptcy, a lawyer for the senior lenders said the debt was trading for about 20 cents on a dollar, meaning the current debt of $318 million would be worth about $64 million.
The company's reorganization plan calls for paying senior lenders about $67 million in cash and property to settle that debt.
The plan also calls for the company to be put up for auction as a way of identifying its fair-market value.
Abid Qureshi, a lawyer for the senior lenders, contended the company's request for information on its debt was an attempt to intimidate lenders, who typically view such information as proprietary.
Kirk Wickman, Angelo Gordon's chief administrative officer, testified that his firm treated such information as confidential. If it were revealed, he said, it could expose the company's trading strategies to competitors.
Qureshi, in an interview, dismissed the company's position as "part of a strategy to dissuade senior lenders from participating in the auction."
The senior lenders have said they would like to purchase the company at auction. They contend the company has pursued a strategy designed to block such a purchase.
Key to the lenders' hopes of buying the company is the right to use the debt they are owed to bid at the auction. The company wants all bids to be made in cash. The U.S. Court of Appeals for the Third Circuit is currently considering the lenders' request to credit bid.