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Talks continue on papers' financing

Talks to resolve a complicated interim financing plan for Philadelphia Newspapers L.L.C. continued yesterday, and some resolution could be presented to the U.S. Bankruptcy Court today.

Talks to resolve a complicated interim financing plan for Philadelphia Newspapers L.L.C. continued yesterday, and some resolution could be presented to the U.S. Bankruptcy Court today.

In a brief hearing yesterday, Chief U.S. Bankruptcy Judge Stephen Raslavich said that a mediator reported that the company and its senior lenders were making progress to untangle several key issues that had stalled the case, which has become a battle for control of the company that owns The Inquirer, the Philadelphia Daily News, and Philly.com.

Philadelphia Newspapers has requested permission to borrow $15 million to sustain the company during the coming months. Under bankruptcy rules, that loan would be the first to be paid off upon reorganization.

The company's creditors - including the largest senior lenders, Angelo, Gordon & Co., and CIT Group Inc. - objected. They have offered to finance a similar loan, but on terms that would require lenders' approval of any reorganization plan. The company is opposed to that provision.

The effort to sort out the interim financing has become a legal Rubik's Cube because it is intertwined with several other critical unresolved issues in the bankruptcy proceedings, which have been combative.

The company is seeking an additional two months to put its reorganization plan into place without having its creditors propose competing plans. The lenders have opposed an extension of that period of exclusivity, which expires Monday.

"All of the motions pending before the court are tied into the negotiations," said Lawrence G. McMichael, the company's attorney. "If we can reach an agreement, we'll report it to the court."

The side issue of the interim funding plan, called debtor-in-possession financing, is being mediated by Bankruptcy Judge Richard E. Fehling, who is based in Reading.

The company sought bankruptcy protection in February and last week presented a $92 million plan that would use cash and property to clear about $300 million in secured debt.