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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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…)

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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…)

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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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1. AJC moving to metro Atlanta’s real downtown (The daily will be abandoning its intown digs for a new, OTP office. Yep.)

2. Lisa Borders up in latest mayoral poll (Though Councilwoman Mary Norwood still holds the lead, Council Prez Borders appears to be making progress. Someone’s pissed.)

3. Creative Loafing Inc. and its largest creditor will duke it out next week (The fate of the six-newspaper chain will be determined at an equity auction TOMORROW. Stay tuned.)

4. Threesome assault defense, ‘Ah jest wanted to watch’ (Total weirdness.)

5. Troy Davis deserves hearing, says Supremes (Somebody — the U.S. Supreme Court, no less! — is finally granting the longtime death row inmate a hearing on his innocence claims.)

(Photo by Joeff Davis)

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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:

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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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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…)

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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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(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…)

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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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