A federal appeals court says Philadelphia's two major daily newspapers can deny creditors the right to use about $300 million owed them to bid at an upcoming bankruptcy auction.

Monday's split 2-1 decision upholds a lower court ruling in a bitter dispute for control of The Philadelphia Inquirer and the Philadelphia Daily News.

The panel says the bankruptcy code "unambiguously permits" a debtor to craft any plan that gives lenders a clear equivalent of their secured interest. The opinion says lenders have no statutory right to bid with the company's IOUs.

An auction is set for next month.

A local ownership group — comprised of two current and one new investor — hopes to win the auction with a bid of $67 million in cash and real estate.