Action on Phila. newspaper campaign delayed

Philadelphia Newspapers L.L.C. can keep pressing its "Keep It Local!" campaign for the moment, as lawyers on both sides of the company's bankruptcy case agreed yesterday to forgo a hearing on the matter and to try instead to mediate more immediate issues.

They did so at the urging of Chief Bankruptcy Judge Stephen Raslavich, who made it clear he thought the conflict over the publicity campaign was a distracting sideshow.

The company launched the campaign about two weeks ago after issuing its reorganization plan. The campaign has included daily full-page ads in The Inquirer and the Philadelphia Daily News making the case that the papers would fare better under "local ownership" than with an out-of-town buyer.

Under its plan, the company, which owns The Inquirer, the Daily News, and Philly.com, would use $66.6 million in cash and property to settle about $300 million in secured debt. The plan also calls for the media firm to be put up for bid to see if any potential buyers are willing to offer more than that.

Raslavich derided an argument by the committee of unsecured creditors that the publicity campaign would keep other bidders from stepping forward. The company's senior lenders - which include Angelo, Gordon & Co.; the CIT Group Inc.; and Citizens Bank - have already said they want to bid.

"I have a difficult time seeing how . . . large, sophisticated lenders are going to be deterred by those ads," Raslavich said.

At the same time, he told the company's lawyers that the dispute might be easily resolved if the new local investor group that wants to own the papers paid for the ads. That group includes two of the original investors: Bruce Toll, vice chairman of the home builder Toll Bros. Inc., and the carpenters' union pension fund.

Both sides agreed to put off a hearing on the matter until next week and instead spent the day in mediation over the terms of a $15 million short-term loan the company needs to continue to operate in bankruptcy.