Philadelphia Newspapers L.L.C. has lost its fight to bar lenders from using the debt they are owed to bid on the company when it is put up for auction.
The decision by Chief Bankruptcy Judge Stephen Raslavich, which was filed today, gives the lenders the upper hand should the company go through with the auction as part of its reorganization plan.
The company, which owns the Philadelphia Inquirer, the Daily News and Philly.com, had argued that if the lenders were permitted to bid the $300 million they are owed, other potential bidders might be reluctant to participate in the auction, reducing the ultimate value received for the company.
Raslavich, in his opinion, said the company's position appeared "to be a not-so-thinly veiled attempt to manipulate the sale process" to block the lenders from winning control of the company.
The company's reorganization plan calls for senior secured lenders to receive $66.6 million in cash and property to settle about $300 million in secured debt.