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Fresh Loaf

Atlanta news and views, one slice at a time

Bids for Creative Loafing Inc. will soon be revealed

August 20, 2009 at 12:02 pm by Mara Shalhoup in News

Who, oh, who will be our mystery date?

Today marks the deadline for prospective buyers to join next week’s auction of Creative Loafing Inc.’s six-newspaper chain (which includes yours truly).

As of now, there are only two bidders: a group headed by current Creative Loafing Inc. CEO Ben Eason, and New York hedge fund Atalaya Capital Management, from whom Eason borrowed $30 million to purchase the Chicago Reader and the Washington City Paper. Both parties have waged a fierce, yearlong battle in federal bankruptcy court to take control of the nation’s second-largest altweekly chain.

Eason filed for Chapter 11 bankruptcy protection last September, after falling behind on payments to Atalaya.

According to a court document filed today, all bidders will be provided with the details of opposing bids by noon tomorrow. What’s more, Eason’s camp is seeking the option to vigorously probe opposing bids before the Aug. 25 auction:

“It is unclear whether the procedures surrounding the Equity Auction will allow for Competing Bidders to test various features of the Competing Bids in open Court through the presentation of witness testimony or some other means of evidentiary presentation. … Thus, it is imperative that [Eason and his management team] have an opportunity to explore [Atalaya's bid] and other Competing Bids at or prior to the Equity Auction hearing date.”

The judge in the case has set a hearing for 2:30 p.m. tomorrow to “consider and act upon” Eason’s request.

The AJC published a story today about the upcoming auction, in which both Eason and Atalaya assert that their bids — the details of which will be filed today in federal bankruptcy court in Tampa — are the best:

Any bid has got to have cash, management and know-how, and be in a position to run the business and pay off debt,” said Eason. “We have all of that.” …

“We are going to come into court with a bid we believe will prevail,” said [Atalaya] managing partner Michael Bogdan. “And if somebody starts with higher bid, we are absolutely willing to raise our bid.”

According to documents filed in the case, Atalaya will present the opening bid of be $2.2 million. It appears that any amount above $2.5 million will go toward paying back a portion — $18 million — of the $30 million owed to Atalaya.

The winning bidder also will have to take on a loan to repay the remaining $12 million owed to Atalaya — meaning that if no bid tops $2.5 million, Atalaya will still recover $12 million of its loss.

Eason has expressed concern that Atalaya could bid as high as $20 million at auction and simply pay itself back. As Eason told the St. Petersburg, Fla., Times:

“How do you preside over a fair auction where one of the bidders has an advantage that would cause others not to bid,” said Eason … . “It’s like pulling money out of one pocket and putting it into another.”

We’re keeping our eyes on the filings in bankruptcy court. Check back later today for updates on the details of the bids, as well as the emergence of any surprise bidders.