In re Philadelphia Newspapers, LLC, et al.: Lenders Purchase Debtors' Assets Pursuant to Chapter 11 Plan in Response to Denial of Right to Credit Bid
July 13, 2010
Attached is an update to the firm's previous Alert Memo, dated March 25, 2010, addressing the U.S. Court of Appeals for the Third Circuit's decision in In re Philadelphia Newspapers, LLC, et al. On June 29, 2010, the U.S. Bankruptcy Court for the Eastern District of Pennsylvania confirmed a Chapter 11 plan providing for the sale of substantially all of the debtors’ assets to an entity controlled by certain of the debtors’ prepetition lenders. The confirmed plan, once substantially consummated, will mark the end of bitter litigation between the debtors and their prepetition lenders regarding the lenders’ right to credit bid for their collateral being sold pursuant to the debtors’ Chapter 11 plan. The approach taken by the lenders in the auction for the debtors’ assets represents a potentially effective response by lenders concerned about the risk of judicial undervaluation of their collateral to the Third Circuit’s denial of an absolute right to credit bid in Philadelphia Newspapers.