Fresh Loaf

UPDATE: According to the St. Petersburg Times, the judge determined today that she won’t issue a decision on the rules of the CL’s equity auction until the actual auction day. Details below.

Our colleague Wayne Garcia, at our sister paper in Tampa, is keeping us in the loop on the latest hearing in the ongoing battle to determine who will be the owner of the six-newspaper Creative Loafing Inc. chain, the second-largest alt-weekly conglomerate in the country.

The battle is between current owner Ben Eason, whose family founded the chain, and Eason’s largest creditor, hedge fund Atalaya Capital Management.

Today’s hearing will was expected to finalize some important rules for the Aug. 25 equity auction, which will determine who will control the company. But the judge decided to hold off on finalizing the rules until the very day of the auction.

The St. Pete’s Times reports:

Creative Loafing, the weekly alternative newspaper chain based in Tampa, fears a bankruptcy auction of its stock next month could break up the company.

On Wednesday, representatives of Ben Eason, whose family started Creative Loafing more than 30 years ago, appealed to a judge to block its largest creditor from winning the auction….

Eason fears the deep-pocketed Atalaya could blow away other bidders, including Eason himself, and begin liquidating the company for cash as early as September.

Garcia, in Tampa, characterized the courtroom proceedings as “complex, confusing and undramatic.” He also writes that Atalaya has expressed interest in investing in Creative Loafing, should the hedge fund become the newspaper chain’s owner. Garcia also points out that Atalaya has claimed it intends to run the company, not liquidate it:

Atalaya, during hearings earlier this year, also said it plans to operate the business as a news media company and has a management consultant lined up. It also said it would make an additional $1 million line of credit available to the new CL if it is the successful bidder, for operational needs. “We’ve committed some real money here,” [Atalaya’s lawyer Tyler] Brown said in court.

(Photo by Joeff Davis)

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Editor & Publisher, the leading trade journal of the dying print news industry, has a short piece about CL’s upcoming bankruptcy auction. Here’s a chunk:

The auction was scheduled after Creative Loafing CEO Ben Eason and the group’s largest creditor, Atalaya Capital Management LP, agreed on a reorganization plan that will write down the value of Atalaya’s $31 million loan to $12 million. All other creditors will be paid in full under the plan, with the exception of BIA Digital Partners, which also provided some funding for Creative Loafing’s 2007 acquisition of the Chicago Reader and Washington City Paper. BIA plans to join with Eason in bidding for the chain.

Got all that? If so, please give me a call and explain what’s going on. All I know is what’s run on the CL Tampa blog, written by Wayne Garcia, who’s attended all the court hearings down there.

Anyway, the drop-dead, come-to-Jesus, Four-Horseman date is Aug. 25. That’s when some lucky bidder will have bought himself a newspaper. We’ve got no idea what will happen. All we ask is: Be gentle.

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Our colleague Wayne Garcia at CL’s sister paper in Tampa reports:

And it will be on Aug. 25, during a hearing in downtown Tampa that will start at 10 a.m. Federal Bankruptcy Judge Caryl E. Delano today approved a disclosure statement for Creative Loafing’s reorganization plan after a week of intensive talks between the chain’s owners, in the form of company CEO Ben Eason, and its largest creditor, Atalaya Capital Management LP.

Atalaya is the investment fund that was owed $31 million from financing CL’s 2007 pay-down of debt and purchase of the Chicago Reader and Washington City Paper. As part of the negotiations, Atalaya has agreed to write-down its promissory note to $12 million, which would be repaid at 8 percent interest-only for five years and balloon due at that point.

According to the terms of the reorganization plan and promises made in court today, all CL creditors would be paid in full with two exceptions: Atalaya and BIA Digital Partners, which provided additional lending in the 2007 deals. BIA is now part of an Eason-led equity group that will bid for ownership against Atalaya.

…

“We are on board and supportive of moving forward under this process,” Atalaya’s lawyer, Tyler Brown, told the judge via telephone during the noon hearing.

That means that Atalaya is supporting the reorganization plan and auction process. It remains, however, interested in owning the nation’s second-largest [alternative] newspaper chain and has put in what is called a “stalking horse offer” of $2 million that will be the first bid up during the Aug. 25 equity auction, at which anybody can essentially bid to own the post-bankruptcy Creative Loafing.

Continue reading “Bankruptcy judge sets auction date for ownership of Creative Loafing alt-weekly chain” …

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Our Tampa colleague, Wayne Garcia, is closely following Creative Loafing’s court appearance today in Florida, during which the company’s CEO is arguing to maintain ownership of his six newspapers. Here’s Garcia’s second post from yesterday’s proceedings:

From an afternoon of Ph.D.- or MBA-level financial testimony, here’s the bottom line in the hearing for control of the Creative Loafing chain of alternative weekly newspapers:

– Lender Atalaya Capital concluded its case with testimony from Deloitte valuation expert Stamos Nicholas, who went through a detailed report he produced that concludes Creative Loafing’s value as a company dropped from $19 million on Sept. 30, 2008 — a day after it filed for Chapter 11 bankruptcy protection — to $11.4 million by Dec. 31, 2008. Nicholas blamed falling revenues and operating margins at the chain, as well as a general economic collapse in the wider economy.

CL’s attorney Tim Andreu challenged Nicholas’ report on cross-examination, pointing out that Nicholas did not speak with the chain’s management to learn more details about the financial assumptions he used for his valuation.

(more…)

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Ben Eason

Wayne Garcia, our colleague at CL’s Tampa paper, attended today’s hearing about Creative Loafing Inc.’s bankruptcy protection proceedings.

Garcia reports:

Current Creative Loafing CEO and Chairman Ben Eason won a partial victory in federal bankruptcy court in Tampa today as Judge Caryl E. Delano refused to grant a motion by lender Atalaya to give it ownership of the company.

At a preliminary hearing this afternoon, Delano ruled that Creative Loafing’s reorganization plan should move forward and that it is too early to say that it can’t work. If it were nine months or more into the bankruptcy, Delano said from the bench, such a motion would be worth pursuing. “We’re three months into the case. I think the debtor should be provided a reasonable opportunity…. This case has been on a short string,” Delano told the parties in court. “The debtor has complied with those timetables” in producing a preliminary reorganization plan.

Garcia reports the judge scheduled an evidentiary hearing for Jan. 21. A hearing to review the proposed reorganization plan has also been scheduled for Jan. 26. Read more at Garcia’s blog.

(Photo by Jim Stawniak)

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