Creative Loafing heads to bankruptcy court to reorganize
September 29, 2008 at 2:20 pm by Wayne GarciaOur parent company filed a Chapter 11 reorganization case in federal bankruptcy court this morning, the result of a slowing economy exacerbated by debts it took on in May 2007 in buying the Chicago Reader and Washington City Paper alt-newspapers.
CEO Ben Eason
“I don’t see this as bad news,” CL’s CEO Ben Eason said at a noon staff meeting in Tampa. Many other media companies have been hurt in this economy, and others are successfully reorganizing their finances or changing the terms of their debt to cope, he added.
Eason addressed staff in Tampa this morning to announce the legal action after the media company’s board voted early this morning to file in bankrtupcy court in Tampa. He was upbeat about Chapter 11’s ability to ease the debt crunch the newspaper chain is facing as it tries to increase its online presence while at the same time dealing with falling print revenues because of the housing crisis and resulting slower economy.
“This company has got cash,” he said. “This is not a cash issue. This is not a management issue. It’s strictly the economy tanking.”
Eason continued: “This company is not a sinking ship. We have an excellent shot at coming out of this with a fresh start” and redrawn debt repayment terms.
Eason added that employees and vendors would continue to be paid and the newspapers in six U.S. markets would continue to publish weekly. No layoffs or other changes are anticipated as part of the Chapter 11 case, he said.
Ironically, CL was poised across all its newspapers to make cuts in its editorial budgets by the end of October in an attempt to free up more cash to make debt payments. With the debt issue on hold because of the bankruptcy court action, Eason said he has told editors those cuts now do not have to be made. The cuts had not been revealed here in Tampa, but in Washington they had been the focus of stories in the press for about a month.
The bankruptcy filing was caused by an inability to generate enough revenues in the current advertising sales slump nationally to satisfy the debt payments and terms of the debt taken on in the purchase of the Chicago and Washington papers last year.
Chapter 11 of the federal bankruptcy code shields a company from its creditors while it puts together a reorganization plan that must be approved by the court. While it is possible that the court could take many different actions — from dissolving the company to forcing its sale or breakup — Eason said those actions are highly unlikely in CL’s case. “We’re going full steam ahead” in growing the newspapers’ online presence, he said. “Just watch us.”
Among the largest unsecured creditors is Fayetteville Publishing Co., which prints the Tampa Bay edition and some of the other papers in the group. The Georgia Department of Labor, the Georgia Department of Revenue and the IRS are also among the creditors. The listing of creditors on a bankruptcy filing doesn’t indicate, as some news accounts suggested, that Creative Loafing was not paying its vendors or taxes, Eason said; it is merely a court-required list of those companies that do business with CL.
Creative Loafing was founded in 1972 by Debby Eason in Atlanta and later opened several other papers in the Southeast. Ben, who owned the Tampa paper, acquired the rest of the family newspapers in 2000.
