Fresh Loaf

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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Wayne Garcia, political editor of CL’s Tampa paper, writes that the judge in the company’s bankruptcy court case has asked the sides to deliver closing arguments in writing. She will review the details and deliver a decision in an as-yet unscheduled conference call.

Don’t wait up for a decision in our Tampa bankruptcy court hearing today; Judge Caryl Delano said early this evening that she did not plan on ruling immediately on whether lender Atalaya Capital Management should be allowed to declare Creative Loafing in default of its $31 million in loans and take over the alt-weekly chain.

Testimony was continuing into the evening in the hearing. Creative Loafing’s valuation expert, Michael Mard of Tampa’s Financial Valuation Group of Florida, testified through all of Tuesday afternoon about his assessment that the chain absorbed most of its losses and revenue declines before its Sept. 29, 2008, Chapter 11 bankruptcy filing. He put the value of the company at $7 million on Sept. 30; $12 million on Dec. 31, 2008; and $13 million by February of this year.

Read the rest of Garcia’s update here.

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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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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.

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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.

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