Fresh Loaf

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…)

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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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1. AC Milan v. Club America (Who knows when Atlanta will get to witness such quality soccer — or such HORRIFIC traffic jams — again. Actually, there’s probably a traffic jam planned for about 15 minutes from now.)

2. BMF member arrested, Jay-Z’s ‘Death of Autotune’ gives nod to the crew (Two milestones for the infamous Black Mafia Family.)

3. Fun CL bankruptcy news! (Wednesday will be a pivotal day for the future of Creative Loafing. Stay tuned.)

4. Filthy Rich: Best of Atlanta 2009 ballot (You only have until this Friday to cast your votes for CL’s 2009 Best of Atlanta issue. After that, the opportunity will be lost forever.)

5. Atlanta at $20 per gallon of gas (A vision of armageddon.)

(Photo by Alejandro Leal)

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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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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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Ever since their new publisher told them in mid-January that the paper was losing $1 million a week, AJC employees have been bracing for a payroll bloodletting. And those who weren’t worried then got up to speed a month later when newspaper brass held meetings to warn staffers that “substantial” cuts were on the way.

Well, the rumor now going around Marietta Street is that the paper is poised to execute layoffs on an unprecedented scale, if not this week then early next week. The number being bandied about is that at least 25 percent of the newsroom could be let go. That’s what you’d call a Holy shit! number.

To put this in perspective, the paper shed about 70 of its most experienced writers and editors in its first round of buyouts back in July 2007, then unloaded another 73 last August in a second round that wasn’t restricted to old-timers. Combined with still others who’ve been lost through attrition, the AJC newsroom currently numbers somewhere around 325.

If the 25-percent figure proves to be accurate, that could mean upwards of 80 editorial staffers who stand to get axed – in addition to layoffs in other, non-editorial, departments.

(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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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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