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Air America Radio files for Chapter 11 bankruptcy.

NEW YORK (Reuters) - Air America Radio, the liberal news and talk radio network whose on-air talent includes comedian Al Franken, on Friday filed for Chapter 11 bankruptcy protection after talks with a creditor broke down.

The network said it plans to stay on the air while it reorganizes. In a filing with the U.S. bankruptcy court in Manhattan, Air America said it lost about $40.9 million since the spring of 2004, including $13.1 million so far in 2006.

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"This regrettable action became necessarily only recently when good faith efforts to resolve outstanding debt with a creditor from the company's earliest days broke down," Air America said in a statement.

Air America was launched in March 2004 with programming to counter-balance politically conservative shows by nationally syndicated hosts like Rush Limbaugh and Sean Hannity.

The New York-based company said it has 4 million listeners, and has on-air personalities including Robert Kennedy Jr. and Randi Rhodes. Air America also syndicates a radio show from television host Jerry Springer.

Scott Elberg, who became chief executive on Monday, said in an affidavit that Air America's backers advised last month that they would no longer subsidize the network's operating losses. He said this led Air America to consider a possible sale or liquidation.

Also in September, MultiCultural Radio Broadcasting Inc., a creditor that said it is owed $550,000, blocked Air America from drawing needed cash from its bank accounts, Elberg said. The bankruptcy filing will lift this restriction, he said.

MultiCultural Radio, also based in New York, did not return a call seeking comment.

"Nobody likes filing for bankruptcy," Elberg said in a statement. "This move will enable us to concentrate on informing and entertaining our audience during the coming months."

Elberg had been an Air America vice president, and is a former general manager of New York's WLIB radio station. He is the latest of several chief executives at Air America, who have included radio industry entrepreneur Danny Goldberg.

Franken is owed $360,750, while Robert Glaser, the chief executive of RealNetworks Inc , has a $9.8 million secured claim, court papers show.

Air America said it will seek court permission to obtain up to $3 million of financing from an entity called Democracy Allies LLC so that it may operate while under Chapter 11.

Air America filed for protection from creditors as Piquant LLC, doing business as Air America Radio.