Fresh Loaf

CL’s Chanté LaGon and Thomas Wheatley discuss the equity auction that took place on Tues., Aug. 25, where Atalaya Capital Management gained ownership of Creative Loafing Inc. from former CEO Ben Eason. Wheatley goes into detail about what took place at the auction as well as the events that led up to Creative Loafing Inc. filing Chapter 11 bankruptcy in September 2008.

Air Loaf is broadcast weekdays on 1690 WMLB-AM at approximately 8:10 a.m., 12:20 p.m. and 6:20 p.m.

Download

Subscribe to the Air Loaf RSS feed to download each new episode automatically

Bookmark It

Ben Eason

(Updates below, with additional reporting by Thomas Wheatley.)

… Atalaya Capital Management.

The auction, which began this morning, determined who will control Creative Loafing Inc.’s six newspapers, which compose the nation’s second-largest altweekly chain. It also marks the end of CLI’s yearlong bankruptcy.

Outgoing CEO Ben Eason lost control of the company his parents founded in 1972 to the New York hedge fund from whom he borrowed $30 million to buy the Chicago Reader and Washington City Paper.

Atalaya won the auction with a $5 million cash bid. Eason’s highest offer was a $2.3 million bid, nearly $1.5 million of which was “in-kind contributions.” Had Eason won, he also would have had to repay Atalaya at least $12 million.

Reporters, CLI managers, and Eason family members filled the courtroom to capacity.

Bankruptcy Judge Caryl E. Delano opened the equity auction with CLI’s bid. Tyler Brown, representing Atalaya, asked the judge if bids needed to be entered in increments of $50,000, to which Delano replied they did. People who might have been prepared for a game of one-upmanship were then disappointed, as Brown submitted Atalaya’s bid of $5 million in cash.

CLI’s lawyers asked for a brief recess.

When the recess ended and Delano returned to the bench, CLI’s lawyers asked her to close the auction. They wanted to argue that Atalaya’s bid might have been the “highest,” but it wasn’t necessarily the “best.” If Atalaya gained control of the company, they said, there was no guarantee that the hedge fund wouldn’t split the company into pieces and sell off the papers.

(more…)

Bookmark It

UPDATE: We have a winner.

In case you haven’t heard, today is equity auction day!

Creative Loafing reporter extraordinaire Thomas Wheatley is in sunny Tampa to cover what might be the final chapter in Creative Loafing Inc.’s yearlong bankruptcy saga. Wheatley’s first update is posted a little further down — hold on! — and he will continue to offer dispatches throughout the day.

First, to bring you up to speed: The auction pits current CLI CEO Ben Eason, whose family founded Creative Loafing 37 years ago, against Eason’s biggest creditor, Atalaya Capital Management, from whom Eason borrowed $30 million to buy the Chicago Reader and Washington City Paper in 2007. Eason has said the burden of the loan forced him to seek Chapter 11 bankruptcy protection last year.

If Eason prevails, he will have to pay Atalaya back at least $12 million (on top of any amount exceeding a bid of $2.5 million or higher). The remainder of the $18 million owed Atalaya — if there is any — will be written off.

Wheatley reports that Eason’s opening bid is $2.3 million, including $825,000 cash and the remainder in “in-kind contributions.” Yesterday, Atalaya filed a motion contesting the contributions, but the judge ruled this morning that they were admissible. Atalaya then reserved the right to challenge them later today.

Following Eason’s opening bid, Wheatley reports, Atalaya upped the ante: $5 million cash, on top of including the $2 million cash and $1 million line of credit it already promised in its own opening bid.

Eason’s attorney then asked for a brief break.

(more…)

Bookmark It

Only two bidders will compete in next week’s equity auction that will determine who controls Creative Loafing Inc.’s six newspapers: a team headed by current Creative Loafing CEO Ben Eason, and the New York hedge fund to whom Eason owes $30 million, Atalaya Capital Management.

According to a document filed today in federal bankruptcy court in Tampa, where Eason filed for Chapter 11 bankruptcy protection last year:

Creative Loafing, Inc. and affiliated debtors … hereby file for in camera review …  the documents comprising the respective bid packages received from Atalaya … and Creative Loafing Management, LLC (“CLM”), which are the only bidders identified as Qualified Bidders pursuant to the Bidding Procedures Order.

The deadline for bidders to join the Aug. 25 auction was 4 p.m. yesterday.

Details of the bids have not been filed in bankruptcy court, though past documents state that Atalaya will present the opening bid of $2.2 million. 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.

UPDATE: Our colleague Wayne Garcia, at Creative Loafing Tampa, attended a hearing related to the case this afternoon and has this to report:

(more…)

Bookmark It

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.

(more…)

Bookmark It

Some headline writer at the AJC had fun with today’s article about the impending CL bankruptcy auction. Before it was corrected, the headline read thusly:

Yes, that’s right — apparently, CL president Ben Eason and his two sisters will also be going on the auction block next week. Do we hear $1,000? Who’ll give me $1,500?

The online headline has since been changed to read:
“Creative Loafing chain up for auction,” which is more accurate, if less amusing.

Anyway, kidding aside, the article portrays the auction as a showdown between Eason and the company’s main creditor, Atalaya Capital Management, a New York-based investment fund. Those who’ve breathlessly followed this ongoing saga will recall that, last month, all parties agreed to end the bankruptcy proceedings with a so-called equity auction in which the newspaper chain would be sold to a qualified bidder who provides the best combination of money and a suitable management plan. The auction is scheduled for next Tuesday, Aug. 25, in a Tampa courtroom.

(more…)

Bookmark It

(UPDATE — For reasons beyond our understanding, the bankruptcy court’s next hearing date will be Wednesday, July 29, rather than Monday, as indicated below.)

Those who still care have their calendars marked for Aug. 25, the date of the Great CL Equity Auction that will determine the future ownership of our li’l old alt-media empire. But wait! There’s a new deadline looming on the horizon for the truly obsessed. That’d be July 27, this coming Monday, the fateful day when the lovely and talented bankruptcy Judge Caryl Delano in Tampa sets the rules of the aforementioned auction.

According to CL CEO Ben Eason in a new interview with Chicago Reader media critic Micheal Miner, the rules of the auction could either boost or destroy his chances of hanging on the company. That’s because Atalaya Capital Management, CL’s primary creditor, already has $31 million sunk into the company. Unless the judge places restrictions on how the bid money must be spent, Atalaya could, theoretically, bid up to $31 million to win the auction, then pay itself off and take sole ownership of the company.

Still awake? Here’s Eason’s take:

“What the issue really is is who’s going to keep their money in. Who’ll be involved in this thing for the long haul. It appears the way Atalaya is coming at this they’ll put their money in and immediately take it out. That’s part of their financial engineering, it’s a typical Wall Street hedge fund being slick with the money. But we’re looking to make sure that whoever bids at the equity auction truly wants to hold the company.”

In other words, although this isn’t made explicit in the Miner piece, Eason expects the judge to mandate that a sizable chunk, if not all, of the money represented by the winning bid must be invested directly into the company to ensure its continued viability.

And if that doesn’t happen?

“It’s over,” said Eason. “It’s the same thing as a foreclosure.”

(more…)

Bookmark It

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” …

Bookmark It

Creative Loafing CEO Ben Eason

1. CL CEO keeps company (Creative Loafing Inc.’s biggest creditor fails in its efforts to take over the six-newspaper chain, and CL’s bankruptcy saga continues.)

2. Earl Paulk, DeKalb’s frisky “bishop,” to be laid to rest (The charismatic leader of a 12,000-congregant mega-church was repeatedly accused of sexual misconduct, all but obliterating his legacy.)

3. Mayor’s race begins in earnest at witching hour Friday (Upon the official end of the ‘09 legislative session, campaign season for local pols kicked into high gear.)

4. Georgia’s Confederate History Month, the idea that will not die (Misguided lawmakers push for a 30-day holiday that much of rural Georgia already celebrates 365 days a year.)

5. It’s official: Borders is off and running (After dropping out of the mayoral race to care for her ailing parents, City Council Prez Lisa Borders is back in.)

Bookmark It

Here’s the latest dispatch our colleague in Tampa, Wayne Garcia, about Creative Loafing Inc. CEO Ben Eason’s attempt to retain control of his six-newspaper company. The case continues next Tuesday in Florida bankruptcy court.

Ben Eason

It was A Tale of Two Media Companies as Creative Loafing CEO and President Ben Eason testified Thursday afternoon during a hearing to determine whether he keeps ownership of the alt-newspaper chain.

Or perhaps I should write, ownership of the alt-digital media company. Much of Eason’s testimony concerned the collapse of the print news publishing economic model starting in 2005 and accelerating with the advent of the current recession in mid-2008. Under direct examination from CL’s bankruptcy lawyer David Jennis, Eason detailed how the company responded to 20 percent decreases in advertising revenues that he says company officials started seeing in July 2008.

“There’s been significant changes in our business…” Eason said in what qualified as the understatement of the day.

Continue reading “CL CEO testifies in bankruptcy court” …

Bookmark It

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…)

Bookmark It

By Wayne Garcia

Creative Loafing Inc. CEO Ben Eason appeared in federal bankruptcy court in Tampa today in the company’s continuing Chapter 11 case.

It was supposed to be a day-long hearing culminating in a decision from Judge Caryl E. Delano as to whether to allow Eason’s biggest creditors — Atalaya Administrative LLC and Atalaya Funding II LP, which loaned more than $30 million to Creative Loafing two years ago to finance the purchase of the Washington City Paper and Chicago Reader — to declare the company’s loans in default and take immediate ownership of the alt-weekly chain.

But that didn’t happen.

Without going into lots of technical bankruptcy law and financial valuation methodology, I’ll just report that testimony in the hearing didn’t go off as planned and has been continued until March 11. Both sides, while complaining of the effect of the delays, worked together during an hour-long recess to reconfigure the Chapter 11 timeline for the case.

Eason’s attorney argued that every day the ownership issue isn’t settled makes it harder to find new equity partners and reorganize the company; Atalaya’s lawyer argued that the value of its collateral continues to decline and is losing the hedge fund millions

Two more hearings, to determine the value of the company and approve part of the reorganization plan, are scheduled for late March and early April.

Bookmark It

Twas the night before Christmas, when all through the Loaf
Not a creature was stirring – they’d all been laid off

Well, it almost rhymes. For the handful of you not already bored to tears by the ongoing saga of CL’s  turbulent excursion through bankruptcy, I offer more holiday reading. The Chicago Reader reports that several employees at that paper got pink slips the week before Christmas.

CLI has suffered ever since the sale, and its cost-cutting hasn’t spared the Reader: Six more layoffs last Thursday reduced this paper’s editorial staff to 17; it was 38 when the old owners sold Eason the paper.

At the same time, our sister Loaf in Tampa cut some folks as well, including three in editorial, as editor David Warner explains:

The options we face are grim: If we don’t streamline and refocus our newsroom operations, we won’t survive.

Cheered up yet, everybody? The Charlotte Loaf didn’t escape the ax, either; some remaining employees were asked to work fewer hours. And our Washington City Paper has also lost a couple of bodies, as reported in the latest tome by Atlanta Mag’s own Steve Fennessy. In fact, for the first time, Steve – an ex-CLer himself – takes direct aim at company president Ben Eason:

One thing he did not express in our discussions, nor has he in any public way to his own employees, is a sense of shame or even regret in presiding over the dismantling of local institutions. Nor has he acknowledged the human toll his decisions have exacted on his employees, who with every week, it seems, grow fewer in number.

Finally, if you haven’t already had your fill of schadenfreude at our expense, you may also enjoy this essay by longtime Loaf contributor and former editor Cliff Bostock:

The fact is that practically no existing print publications have made a successful transition to digital presence. Almost all publications, regardless of web presence, have suffered huge losses in staff and income.

Anyway, everybody, have a happy holiday!

Bookmark It

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)

Bookmark It

Atlanta Magazine’s Steve Fennessy has another update on CL’s adventures in bankruptcy.

CL CEO Ben Eason asked the court handling the company’s case for permission to hire financial advisor Bryan Crino of Tampa-based Skyway Financial Partners. Eason proposes paying Crino $495 per hour, as well as a commission between $250,000 to $600,000.

This week, CL’s creditors asked the bankruptcy judge to reject Eason’s proposal.

Fennessy:

“[CL's largest creditor] balks at Skyway’s “lavish compensation,” which includes at least a $600,000 bonus if the company is sold. Atalaya also points out that Crino, as he himself admitted in court papers, owns an interest in an entity that owns shares in Creative Loafing. Hmm…. A conflict of interest? Atalaya thinks so, and says that Crino is far from a disinterested party.

As far as that $600,000 clause is concerned, Atalaya has more to say, asserting such a clause would “bind” Creative Loafing Inc. to exorbitant fees for services that the chain may not even need.

In what appears to be a not-so-subtle jab at Skyway, Atalaya mentions that Crino and company helped advise Eason on the purchase of the Chicago and D.C. papers last year. “Less than two years later, the value of the combined operations of the Debtors is less than the sales price for those two operations alone. It is currently unknown … whether the Debtors believe they may have claims against Skyway … relating to any prior advice.”

Fennessy, a former senior writer and news editor at CL, also reports that morale is low as the staff awaits further layoffs.

“We’ll probably continue to trim staff as it relates to market conditions,” Eason told Fennessy last week.

Neither Eason, who was in Atlanta this week, nor anyone else at the company, has addressed the staff about layoffs.

Bookmark It

Creative Loafing Inc. has asked a bankruptcy judge to allow it to pay $495 an hour to the investment banker who engineered last year’s purchase by CL of two other alternative weeklies, according to Atlanta Magazine’s Steve Fennessy. This time, Skyway Capital Partners’ Bryan Crino would be tasked with helping to solve the company’s financial woes.

Under the company’s Nov. 10 motion to the bankruptcy court, if Crino engineered a sale of Creative Loafing Inc., he and Tampa-based Skyway would be paid “whichever is greater—a cut of the sale or $600,000,” Fennessy wrote Friday on his Cityscape blog.

CL Inc. CEO Ben Eason told Fennessy in an interview that Creative Loafing Inc. — which filed Sept. 29 for Chapter 11 bankruptcy protection — isn’t for sale: “When you draft these agreements, you’re trying to think through any and all options that might come up.” But Eason does think Crino could help raise the money Eason needs to “recapitalize and recast” the company’s debt. For that, CL Inc. is proposing that Crino be paid at least $250,000.

Meanwhile, Eason said the company may suffer more layoffs. “We’ll probably continue to trim staff as it relates to market conditions,” he told Fennessy.

Creative Loafing/Atlanta is one of six alternative newsweeklies owned by Creative Loafing Inc. The others are Creative Loafing/Charlotte, Creative Loafing/Tampa, Creative Loafing/Sarasota, the Chicago Reader and Washington City Paper.

The Chicago and DC papers were purchased last July in the purchase that Crino helped orchestrate. Eason is battling the Atalaya investment fund, which lent CL Inc. $30 million as part of that deal, for control of the company.

The motion to has yet to be ruled upon by U.S. Bankruptcy Judge Caryl Delano.

Fennessy is a former news editor and senior writer for Creative Loafing/Atlanta.

Bookmark It