Lee Enterprises, the nation’s fourth biggest newspaper chain, has been granted a last-minute stay of execution. The new execution date is April 28, 2012, when Lee will owe principal payments of $721m, plus interest.

To put this number into context for you, if Lee sold off all its printing plants, buildings and equipment, and liquidated all its inventory to satisfy its creditors, it would still be $400m short. Stil, Lee thinks it can somehow gut it out. Its sees its enormous problems as temporary, so the party continues!

Lee’s most pressing concern was a $306m balloon payment due to institutional investors in April.  The newspaper company was hit hard by the fall in ad revenues and so bloated with debt that it didn’t have enough cash to pay.  But rather than force Lee into bankruptcy, the lenders have given Lee a three-year reprieve:

Lee today repaid $120 million of the principal amount of its $306 million Pulitzer Notes debt due in April 2009 using a portion of its restricted cash, which totaled $129.8 million at Dec. 28, 2008. The remaining debt balance of $186 million has been refinanced by the existing lenders until April 28, 2012. Under the agreement, $9 million of restricted cash was retained to facilitate the liquidity of the operations of Pulitzer Inc., a wholly owned subsidiary of Lee, and its subsidiaries.

But like a good loan shark, the lenders are going to wring extra dollars out of Lee. Beginning in June, it must pay its lenders $4m every quarter. In October 2010, it will pay a total of $8m cash. Plus the interest rates on the Pulitzer Notes will rise from 8.05 percent to 9.05 percent next year, ultimately increasing to 10.05 percent ($19m) by 2012.

Lee also owes $1.1b amount to the bank, who make concessions to allow the company to survive. Lee owes the bank principal payments totaling $234m over the next three years. Payments at maturity will increase $80m to $535m due April 2012.

Escaping the hangman’s noose wasn’t cheap, by the way. Refinancing this whole mess cost Lee $20m.

Abandon all hope, ye who enter here.