TORONTO - The cross-country newspaper chain run by Canwest Global Communications has fallen into the hands of the insolvent company's banks as they seek to sell the National Post and other big-city dailies for at least $925 million.

That's the amount of money the lenders are owed by Canwest's newspaper and publishing division, and the banks hope they'll get that money back, and more, through an auction process that starts next week.

The Winnipeg-based broadcaster and publisher of the Post and other papers and websites from Vancouver to Montreal said Friday it had reached a restructuring agreement with its creditors, mainly the company's bankers.

Under the deal, the Big Five Canadian banks agreed to make what's considered a "stalking-horse" bid setting the base price for an auction that could fetch more than $1 billion, according to some estimates.

The plan keeps the newspaper assets in the hands of Canwest until a group of interested outside buyers are assembled and their offers evaluated.

If a superior offer doesn't emerge within the next seven or eight weeks, then the banks will take control of the newspapers, said John Clifford, a business law partner at the McMillan law firm in Toronto, which is acting as counsel to Canwest LP's lenders.

Clifford said that in that instance, the banks will set up a new, publicly traded company to operate the newspapers, entirely separate from both the banks and from Canwest.

"The lenders goal here is to be independent from the operations," he said.

"Our clients view it as a step towards keeping the whole business together and recapitalizing it in a way that's much more viable financially than its current structure."

"We clearly see value in keeping the whole together and not selling off bits of it," he added.

For the Big Five banks, the stalking horse bid is meant to spark higher rival offers for Canwest that will help the lenders get their loans repaid when the dust settles on the financial restructuring.

Like many North American media companies, Canwest was forced to seek protection from creditors last fall when the recession squeezed advertising revenues at its newspapers and TV stations. As well, $4 billion in debts piled up from earlier acquisitions produced mounting losses and made it impossible for Canwest to stay out of the red.

Canwest said the creditor protection filing Friday does not include the assets of the National Post, which escaped from CCAA last fall when courts allowed Canwest to shift the national daily into the larger newspaper division. However, the Post will be included in the sale.

The filing, however, does include city and community papers, as well as Canwest Books and Canwest Publications.

In an email to the company's employees, Canwest chief executive Leonard Asper said salaries, benefits and pensions will not be affected by the creditor protection moves.

"We have worked hard to ensure that this financial restructuring plan minimizes -- to the extent possible -- the disruption to you and the operations, and will continue to do so throughout the restructuring process," he wrote.

Asper, however, did say that the latest filing would stop payments to about 50 employees who had previously agreed to buyout offers paid in instalments.

Rumoured bidders for Canwest's newspaper group have included investment company Onex Corp. (TSX:OCX), as well as some of Canada's largest pension funds and leveraged buyout firms.

Paul Godfrey, president and CEO of the National Post, who once led a buyout of the former Toronto Sun Publishing company in the mid-1980s, is also said to be considering a bid.

"I have every intention of continuing on at the National Post," said Godfrey, the former president of the Toronto Blue Jays baseball club. "It's my goal to drive the bus to profitability."

In their own statement, the lenders including Canada's five largest banks and unidentified international financiers, said their bid will at least ensure Canwest's newspaper division continues as a going concern.

"After due diligence, it was determined there is value in acquiring the whole of Canwest LP's business, given the operating synergies that can be realized from a national chain of newspapers and online businesses," the lenders said, adding they would ensure a majority of the company's voting shares remain in Canadian hands while it goes through the auction process.

Canwest spokesman John Douglas said in an interview that the company is already aware of some prospective buyers, though he declined to say how many might take part in the auction process.

"There has been interest, but no, we're not going to talk about it," he said.

Canwest has also arranged up to $25 million in financing from its senior lenders.

Canwest's Global Television operation was put under court protection several months ago, as was the National Post newspaper. Canwest later got permission to move the National Post as a separate legal entity to the larger newspaper division -- amid a widespread expectation that all the publications would be sold.

Until Friday, Canwest's main newspaper division, and some other parts of its business, had been operating outside of creditor protection while the company and its major creditors worked on a deal to cope with billions of dollars of debt.

Canwest said putting the newspaper business under court protection was in the best interests of the company and the 5,300 employees at its publishing operations and will address the division's existing debts and protect its brands.

Besides the Post, Canwest owns major dailies such as the Montreal Gazette, Ottawa Citizen, Calgary Herald, Edmonton Journal, Victoria Times-Colonist and two Vancouver dailies, the Sun and Province.

Canwest's latest filing in an Ontario bankruptcy court also includes various community newspapers and a batch of news websites such as the Canada.com portal.

As with other media companies, Canwest has been affected by the recession's impact on sales of newspaper and television advertising, its main source of revenue. It was been nearly buried under a mountain of debt amassed over the past decade as it expanded beyond the original Global Television business.

The company acquired the former Southam newspaper chain then owned by Conrad Black's Hollinger Inc. for more than $3 billion about a decade ago at the top of the market for newspaper assets.

A few years later, Canwest acquired the Alliance-Atlantis specialty TV broadcaster in a $2.3 billion deal financed by Wall Street investment bank Goldman Sachs.