Battle to control Creative Loafing is heating up
August 24, 2009 at 6:43 pm by Mara Shalhoup in Inside CLUPDATE: The auction is now underway.
On the eve of the Aug. 25 equity auction that will determine who controls Creative Loafing Inc., Creative Loafing’s biggest creditor is trying to disqualify current CL CEO Ben Eason’s bid. If the creditor, Atalaya Capital Management, is successful, it will automatically win control of the company.
Either way, the rightful owner of the six-newspaper chain will almost certainly be determined tomorrow in a federal courtroom in Tampa, the culmination of a yearlong bankruptcy-court battle that pitted Eason against Atalaya, the investment firm from whom he borrowed $30 million to purchase the Chicago Reader and Washington City Paper in 2007.
This showdown is heating up!
Atalaya’s objection offers a glimpse of Eason’s bid, which it calls “facially incomprehensible.” Neither Atalaya’s nor Eason’s bid — the only two that were accepted by the court — has been made public.
The rules of the auction state that prospective bidders must match Atalaya’s opening bid amount of $2.2 million. Bids can be a combination of cash and “in-kind contributions.” Basically, Atalaya is contesting the contributions portion of Eason’s bid.
If Eason prevails, he will have to pay Atalaya at least $12 million (on top of any amount exceeding a $2.5 million bid at auction). The remainder of the original $30 million loan will be written off.
Here’s Atalaya’s objection to Eason’s bid:
Atalaya is compelled to object to CLM’s [Creative Loafing management's] bid because it is facially incomprehensible. Specifically, the amount of CLM’s contributions and the sources for such contributions are not clear in either CLM’s bid or the documents supporting its bid. …
In order to participate in the New Equity Auction, CLM’s bid must include a New Equity Contribution having a value at least equal to $2,200,000. CLM’s bid, however, lacks sufficient information to support that its New Equity Contribution satisfies such a requirement.
On August 24, 2009, Equity Partners [the firm processing the bids] advised Atalaya that it was waiting for additional information from CLM to justify that CLM’s bid actually is a Qualified Bid and then Equity Partners plan to provide an updated report. At the time of this Objection, however, Atalaya has not received such an updated report and has not seen such information and, therefore, is compelled to file this Objection.
August 25th, 2009 at 6:30 am
Good luck guys. Not sure what the best outcome would be for CL, but I pray it happens and you continue to thrive as Atlanta’s best damn news source.
August 25th, 2009 at 7:39 am
The best outcome is out with the old management and in with the new management they have run this thing into the ground.Also this thing what ben cannot offer money and ability to fire the right people
August 25th, 2009 at 10:53 am
tell me again why someone would borrow millions to buy the Chicago Reader and the Washington City Paper?