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Senior lenders allow papers' offer to lapse

Philadelphia Newspapers L.L.C.'s senior lenders yesterday effectively rejected an $87 million offer from the company to settle $300 million in debt and bring the firm out of bankruptcy.

Philadelphia Newspapers L.L.C.'s senior lenders yesterday effectively rejected an $87 million offer from the company to settle $300 million in debt and bring the firm out of bankruptcy.

A lawyer representing the senior lenders said the offer was not enough.

"It came up short," said Abid Qureshi, who represents the Steering Committee of Secured Lenders, which is made up of the company's largest creditors. "The debtor continues to value this business at a level significantly below the lenders."

The offer was good until 5 p.m. yesterday. Qureshi said the lenders would not respond to the offer before the deadline, effectively allowing it to lapse without a direct notice to the company.

The company responded with a statement saying it was "disappointed that this good-faith effort . . . has been met with no response at all. No acceptance. No rejection. No good-faith effort to negotiate. Nothing."

Under the offer made last week, the senior lenders would have received $37 million in cash, the company's Broad Street headquarters, valued at $29.5 million, and a $20 million note to be paid over five years. In addition, the company offered, with certain restrictions, to share profits and any increase in the company's value over five years.

The $20 million note and the offers to share profits and equity represented an improvement over the previous offer from the company, which owns The Inquirer, the Philadelphia Daily News, and Philly.com.

At this point, Qureshi said, the senior lenders are preparing to bid for the company when it comes up for auction Nov. 18.

The senior lenders include Angelo Gordon & Co., CIT Syndicated Loan Group, Credit Suisse Group, Eaton Vance Management, General Electric Capital Corp., and Wells Fargo Foothill. Citizens Bank is the agent for the senior lenders.

The lenders' plan to bid on the company received a significant boost when Chief Bankruptcy Judge Stephen Raslavich recently ruled they did not need to use cash at the auction, but could bid the debt they were owed. An appeal of that ruling is pending.

The auction for the company is open to any bidders. The company has been inviting firms with an interest in bidding to review the company's books.

The company has been championing a bid being made by a group of local investors - Bruce Toll, vice chairman of Toll Bros. Inc.; the Carpenters Union pension fund; and philanthropist David Haas. The group has agreed to provide $35 million in cash. The cash is central to the company's offer to lenders.