The Political Whore

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.

An excerpt from Atalaya’s closing argument (download it in .pdf):

Granting relief [by giving the company to Atalaya] will best protect the companies, their employees and other creditors. Declining to grant relief leaves the Debtors in substantial risk of a further decline in value, which would adversely affect not only Atalaya but hte employees and other contituencies in this case.

An excerpt from Creative Loafing’s closing argument (download it in .pdf):

In everyday parlance, the term “GIGO” is known to mean “Garbage In, Garbage Out.” In other words, bad information begets bad conclusions. With all due to respect to Mrs. [Stamos] NIcholas [Atalaya's valuation expert who testified that the company's value dropped $7 million in the three months after the bankruptcy filing], his opinion of the Debtors’ value in this case is simply wrong due to GIGO. For some unknown (but easily inferred) reason, Mr. Nicholas either was not given the relevant and available information about the Debtors, or chose to disregard that information while formulating his opinions. One of the more obvious impacts of this deficiency is that Mr. Nicholas’ opinion of value fails to account for an actual decline of almost 20% per month in revenues that occurred following the creation of the July 2008 Budget, a fact known to the Debtors and Atalaya as of the [bankruptcy] petition date.

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