Newspapers, creditors agree on financing plan

After months of squabbling on multiple fronts, Philadelphia Newspapers L.L.C. and its major creditors announced a series of accords today that should quicken the pace of the company's bankruptcy case.

The settlements, however, do not mean the end to conflicts. In a hearing in U.S. Bankruptcy Court in Philadelphia, the company and the creditors disagreed strenuously on whether the lenders can use the debt they are owed in a bid to buy the company.

The outcome of that dispute could determine who will ultimately own the media firm.

Ownership clearly is at stake, as Fred Hodara, a lawyer for the senior lenders, announced that his clients intend to seek control of the company that owns The Inquirer, the Philadelphia Daily News and Philly.com. The senior lenders include Angelo, Gordon & Co.; CIT Group; Eaton Vance Management; and Citizens Bank.

Hodara pressed his point by telling Chief Bankruptcy Judge Stephen Raslavich that Robert J. Hall, former publisher of the papers when the company was known as Philadelphia Newspapers Inc., was serving as advisor to the senior lenders. Hall, who was in the courtroom, would serve as a member of the management team if the lenders got control of the company, Hodara said.

In the meantime, the two sides reached some accords after a series of mediation sessions the last two weeks. Those agreements included:

* Citizens Bank, one of the company's senior lenders, will provide $15 million interim financial assistance, known as debtor-in-possession financing. The company had been seeking financing through Republic First Bank. The agreement eliminated a loan clause giving the lenders approval rights over any reorganization plan. It also ensures that no other creditor would move ahead of the senior lenders when it came to repayment of debts.

* The period of time Philadelphia Newspapers has to exclusively pursue its plan of reorganization is extended from Aug. 31 until Nov. 2. The extension will be the last sought by the newspaper company and it can be canceled if the company fails to follow through on its plans to place the firm up for auction.

* Senior lenders can negotiate contracts with any of the company's unions, so long as the unions approach them first. Negotiations also are allowed if and when the lenders officially bid on the company.

* A third party, possibly the U.S. Trustee's Office, will serve as an independent monitor to ensure that the company's auction is open and fair.

* The investigation into an unauthorized taping of a meeting between senior lenders and company officials is suspended until Jan. 2. The company had been pressing for a more aggressive investigation of the taping, which was conducted by an official of CIT Group, a senior lender, at a meeting with company officials.