His withdrawal has allowed Mortimer Zuckerman, the New York property developer and publisher, to emerge as the front-runner to buy the tabloid that was once owned by Robert Maxwell.
Representatives of Mr Black, the publisher of the Daily Telegraph, spent the week in discussions with the key Newspaper Printing Pressmen's Union and the Newspaper and Mail Deliverers' Union, but were unable to match the terms being offered by Mr Zuckerman.
As a result of the impasse, Mr Black has suspended negotiations with the unions, leaving the path clear for Mr Zuckerman, owner of US News and World Report, to proceed with his bid for the paper.
However, a lawyer involved in the negotiations pointed out that Mr Black's bid was better for creditors than Mr Zuckerman's offer, and that a sale to Mr Zuckerman still faced many obstacles.
A bankruptcy court yesterday gave creditors and trade unions more time to seek unanimous backing for Mr Zuckerman's bid. Judge Tina Brozman set another hearing date for next Thursday, giving Mr Zuckerman more time to negotiate, and delaying the introduction of a 10 per cent wage cut.
But she warned the warring factions that she expected to see some tangible progress by that date, saying that 'nothing short of a bomb will get another adjournment out of me next week'.
The third bidder for the newspaper is Silver Screen, the film production company, which is offering employees part- ownership of the paper if its bid succeeds.
Each of the three bidders has a different offer on the table, both in cash terms and in regard to the assumption of debts. Overall the Black offer is seen as the most attractive to creditors.
'Black has recognised that he can't reach agreement with the pressmen and the drivers,' the lawyer said, 'but if the Zuckerman bid fails he could come back - he may be betting that Zuckerman won't get the deal done.' Representatives of Mr Black were present at yesterday's court hearing.
Each trade union at the Daily News has been sounding out the various bidders on the staff cutbacks and changes to working practices that will be required if any deal is to be done.
The delivery union represents 450 staff and the pressmen another 300, and the support of these two unions is regarded as critical for any deal, given their ability to prevent the newspaper being published. The Newspaper Guild of New York, which represents 535 editorial, clerical and sales staff on the paper, had been opposing a takeover by Mr Zuckerman.
The guild had been concerned about Mr Zuckerman's wish to choose which reporters would have to leave the editorial staff, regardless of seniority.
But now that the two powerful pressmen's and drivers' unions have made it clear that they back Mr Zuckerman, the guild may be prepared to line up with them rather than jeopardise any agreement. The paper's management, which had backed the offer from Mr Black, may also be persuaded to go along with a bid from Mr Zuckerman.
Judge Brozman warned in a recent hearing that the inability of the various factions involved to reach common agreement on which bidder to back was 'jeopardising my ability to keep this paper alive'.
The Daily News has been losing dollars 1m ( pounds 518,000) a month since the beginning of the year and has very little remaining in the way of cash reserves. A sudden cashflow crisis at the newspaper is a constant threat.
As the favoured bidder, Mr Zuckerman is now thought likely to make available a dollars 3m cash injection in order to ease the financial difficulties at the newspaper while he tries to finalise the deal.Reuse content