More mediation on interim financing for papers

Lawyers for Philadelphia Newspapers L.L.C. and its creditors said yesterday that they were planning another session before a mediator to resolve a contentious dispute over interim financing for the bankrupt media company.

Lawrence G. McMichael, a lawyer for the company that owns The Inquirer, the Philadelphia Daily News, and Philly.com, said the parties made "a reasonable amount of progress" Monday but were unable to resolve the dispute over short-term financing, known as debtor-in-possession financing.

Chief U.S. Bankruptcy Judge Stephen Raslavich, in a five-minute hearing, allowed the company and its senior lenders to resume mediation attempts today. He ordered them to report back to him tomorrow.

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

The company's lenders - including the largest senior lenders, Angelo, Gordon & Co. and CIT Group - objected.

The lenders offered to finance a similar loan, but on terms that would require their approval of any reorganization plan. The company is opposed to that provision, saying the lenders want local management to "turn over the keys" to the company.

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.