Fresh Loaf

1. In the auction for Creative Loafing, the winning bidder is … (… these guys. Hey, they seem pretty OK!)

2. The mayoral ‘machine’ goes haywire, Reed fires back (Memo urges Atlanta’s black leaders to rally behind a single black mayoral candidate — to keep a white candidate out of office.)

3. Wendy Whitaker, symbol of flawed sex offender law, rearrested (When she was 17, Whitaker gave one of the most regrettable blow jobs ever.)

4. Sen. Jeff Chapman’s views on water conservation, water wars (Chapman’s one of the Gold Dome’s greatest enigmas — one of the few Republicans who doesn’t march in lockstep with his fellow pachyderms.)

5. Oxendine: Build an interstate through East Atlanta? Let’s talk! (Um, no.)

(Photo by Joeff Davis)

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UPDATE: 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:

(more…)

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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…)

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Chicago blogger Mike Fourcher asks — and pretty much answers — a question that’s been dogging us for months, both here at CL’s Atlanta lair and at our sister papers:

What is Creative Loafing’s six-newspaper chain worth?

Is it …

A) $23 million
B) $14.9 million
C) $13.3 million
D) $3.6 million

Seeing as how there’s an equity auction in TWO WEEKS that will determine who will control the Creative Loafing empire, the correct answer could come in handy.

In related print-is-dead news, the Washington Post publilshed a compelling oral history (or was it an obit?) on Sunday about the enviably edgy, CL-owned Washington City Paper. And the Chicago Reader’s Michael Miner reported last week on an interesting conundrum plaguing Creative Loafing’s top managers.

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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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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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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.)

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Eason

Fresh from a Tampa courtroom, our colleague Wayne Garcia has the scoop on CL’s ownership dispute:

Ben Eason, whose family started Creative Loafing in Atlanta in 1972, was vindicated in a federal bankruptcy court in Tampa today, as a judge ruled against a lender’s effort to take control of the nation’s second-largest chain of alt-weekly newspapers.

Judge Caryl E. Delano said despite contradictory (and flawed, in her estimation) reports about the chain’s value since going into Chapter 11 bankruptcy protection in September 2008, there was no evidence given that Eason’s management of the media company is harming its value, as lender Atalaya Capital Management had maintained in its effort to dislodge Eason and the current management.

To the contrary, Delano read from the bench, three days of hearings showed that Eason’s management had done a lot to preserve value, by making budget cuts and introducing an emphasis on web publishing models, including one in Tampa that has produced a sharp increase in web traffic while making the print edition a break-even proposition instead of a money-losing one.

“I find that Atalaya has not met its initial burden of proof and is not entitled to relief [from court stays against it foreclosing on the company's debt] at this time,” Delano said.

Continue reading “CL CEO keeps company — UPDATED” …

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Creative Loafing CEO Ben Eason

Here’s the latest — and most pressing — dispatch on Creative Loafing’s bankruptcy case, from our colleague Wayne Garcia at CL’s Tampa paper:

The battle for control of the six-altweekly newspaper chain Creative Loafing Inc. reaches a climax this afternoon in a Tampa bankruptcy courtroom, when Federal Judge Caryl E. Delano is set to rule on a motion by lender Atalaya Capital Management to take over the company.

Atalaya wants to foreclose on its $31 million in loans given to finance CL’s 2007 expansion and purchase of Washington City Paper and the Chicago Reader. That action was blocked when CL filed for bankruptcy court protection under Chapter 11 of the federal code in September 2008.

I’ll be there and will report as soon as possible from the anti-technology courthouse (no cell phones or laptops allowed in federal court).

Download the judge’s order setting the announcement for 2 p.m. on Tuesday. She’s allowing the out-of-town Atalaya attorneys to attend via telephone.

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Our colleague Wayne Garcia at our sister paper in Tampa has another dispatch from the (seemingly never-ending) bankruptcy case that will determine Creative Loafing Inc.’s fate:

Both sides have filed their closing arguments in writing, concluding the hearing process for an attempt by lender Atalaya Capital Management to take control of the Creative Loafing newspaper chain from CEO Ben Eason. Now, federal bankruptcy District Judge Caryl Delano will rule, expected to come via telephone conference call in the next few days, possibly by Tuesday of next week.

There’s nothing new in either closing argument, just a recitation of each side’s opinion about whether the value of CL has dropped since filing for bankruptcy court protection on Sept. 29, 2008, and whether the current management is harming the company’s value and therefore diminishing the collateral used to secure $31 million in loans from Atalaya. That money was used to retire debt and purchase the Washington City Paper and Chicago Reader.

Continue reading “Closing arguments filed in CL bankruptcy case” …

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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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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” …

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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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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 first post of the day:

The Creative Loafing chain is in a Tampa bankruptcy court hearing today as owner Ben Eason tries to fend off his biggest creditor, which wants to take ownership of the chain and says it has “lost confidence” in Eason’s management.

Atalaya Capital Management LP, an investment fund that is owed $31 million from financing CL’s 2007 pay-down of debt and purchase of the Chicago Reader and Washington City Paper, said in court this morning that it would continue to operate the newspaper chain “as a going concern” and put more dollars into it rather than get rid of it in a fire sale.

Atalaya partner Michael Bogdan testified that the firm has hired another investment banking firm with media experience, Bulkley Capital of Dallas, Texas (with an office in Atlanta, the home of CL’s largest newspaper) to advise it and provide “management assistance” in running the CL papers if it is successful in court today. That firm’s founder, Brad Bulkley, has strong media experience, Bodgan said. Bulkley’s website describes it this way:

Continue reading “CL bankruptcy case in court today” …

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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.

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This is big.

The Tribune Co. is the country’s second-largest publisher of newspapers behind Gannett. (And following the break-up of Knight-Ridder.) The company owns some of the most venerated brand names in print journalism: the Chicago Tribune, Los Angeles Times, Baltimore Sun, Hartford Courant and Orlando Sentinel.

Like Atlanta-based Cox Enterprises, Tribune is heavily invested in broadcasting, with two dozens TV and radio stations across the country. But it also owns plenty of other things most publishing companies don’t mess with, such as a sport franchise (Chicago Cubs), a ball park (Wrigley Field) and a cable sports network.

This afternoon, the NYT reports that Tribune filed for Chapter 11 bankruptcy protection.

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Less than two weeks after he publicly offered a measly $1 million dollars to buy CL’s Atlanta operation, Sunday Paper publisher Patrick Best announced his plans today to publish editions in Tampa and Charlotte — two other markets where Creative Loafing Inc. has newspapers.

Atlanta Magazine’s Steve Fennessy wonders if Best’s announcement might be a bluff.

CL is in the midst of a Chapter 11 bankruptcy, and Best’s move could be intended to pressure CL’s creditors into selling him the Atlanta, Charlotte and Tampa papers:

Best’s announcement could be seen as a way to elevate his profile as a potential buyer of Creative Loafing. His message then would be pretty obvious: Sell the papers to me or I’ll try to run them out of business.

If you have a second, be sure to read Sunday Paper’s terrific press release on the expansion plan.

In the final paragraph, Best openly acknowledges that Sunday Paper’s “brand” strategy is to confuse people:

“‘The Sunday Paper’ is the newspaper industry’s strongest brand,” Best says. “When you refer to the Sunday edition of the Charlotte Observer or the St. Pete Times, you refer to it as the Sunday Paper. We’re taking advantage of the good will and recognition of this product name . . .”

If his short-term expansion plans are successful, expect Patrick to eventually launch a weekly international news magazine. He’ll probably call it Thyme.

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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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The Georgia Supreme Court has ruled that a still-incomplete 1,014-acre project across the harbor from historic Cumberland Island does not have to adhere to state-ordered environmental standards for the area.

In a 5-2 decision, the court ruled that the 1970 Coastal Marshlands Protection Act does not extend to “residential upland areas.” A coalition of environmental and conservation groups sued because they said the development would increase polluted stormwater into marshlands and endanger marine life. The residential portion of the project should have been considered during the permitting process that gave the greenlight to docks and marinas in the harbor.

A dash of irony — Land Resource, the builder of the Cumberland Harbor development, filed for Chapter 11 bankruptcy protection late last month. The future of the project is unknown.

To read the court’s ruling summary, follow the jump.

(more…)

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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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