Attorneys for the owner of the Daily News, Inquirer and Philly.com asked a federal bankruptcy judge yesterday to force several of the media company's major creditors to reveal when they bought their shares of the company's debt, and what they paid for them.
An executive from one of the company's largest creditors, Angelo, Gordon & Co., testified that the firm never reveals such information, and the creditors' attorneys filed a brief attacking the company's effort as "a cynical and inappropriate use" of the bankruptcy code.
The senior creditors hold $318 million in debt secured by virtually all the assets of the company.
Executives of Philadelphia Newspapers, LLC contend that many of the creditors who seek to gain control of the company in a bankruptcy auction were not original lenders, but rather investors who bought the debt at a reduced price.
Lawrence McMichael, an attorney for the media company, said that a long-standing provision in the bankruptcy code requires the disclosure of key information from any group of creditors acting in concert so that "both the court and the parties understand the real economic incentives of creditors."
If someone bought debt for 10 percent of its original value, McMichael said, a settlement that paid creditors 20 cents on the dollar could yield a huge profit.
A company motion filed earlier this month requested that the court require a "steering group" of major creditors to disclose exactly how much each of its members paid for the company debt.
A response filed yesterday by the steering group of creditors called the company's move "yet another, entirely transparent, attempt by the Debtors to ensure that their insiders retain control of these newspapers."
Kirk Wickman, an executive for Angelo, Gordon & Co. testified that the price at which the firm buys distressed debt is "confidential and proprietary" information that is zealously guarded from competitors.
Abid Qureshi, an attorney for the steering group, said yesterday that the media company's motion was aimed at pressuring firms to withdraw from the steering group rather than disclose such information, effectively eliminating the steering group as a potential bidder in the planned bankruptcy auction.