Bankruptcy judge sets auction date for ownership of Creative Loafing alt-weekly chain
July 13, 2009 at 1:38 pm by Wayne Garcia
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.
Monday’s hearing found the normally adversarial Atalaya and CL relationship thawed to some degree.
“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.
Atlaya’s lawyer wrote to CL on July 10:
Atalaya submits that the Atalaya Stalking Horse Offer provides a significantly higher and better recovery for the Debtors’ unsecured creditors than the “Stalking Horse Offer” identified in the Debtors’ prior Second Plan and, together with the Court approved Bidding Procedures and the Equity Auction, a greater prospect for the employees, vendors, and customers of the Company to move forward with a properly capitalized organization having access to sufficient post-consummation working capital. Further, the Atalaya Stalking Horse Offer has the added benefit of allowing the Debtors to emerge from bankruptcy sooner and without incurring the unnecessary costs and expenses of a highly contested auction and confirmation process. Finally, the Atalaya Stalking Horse Offer will provide the Reorganized Debtors the wherewithal to fully implement their business strategy. In sum, the Atalaya Stalking Horse Offer will enable the Debtors to fulfill their duty of maximizing value for their creditors while also providing sufficient capital for the reorganized Debtors.
Atalaya’s offer is more than an initial Eason-BIA group Stalking Horse bid (about $1.5 million in cash and free office space). But Eason plans to bid at auction, as well, so the two sides will likely be locked in a competition for ownership of the chain again, as they were earlier this year during protracted hearings into the future of the media company.
July 13th, 2009 at 1:46 pm
Ummmmm… I’m gonna go cash that contributor check right now. :)
July 13th, 2009 at 3:01 pm
Where’d you get that pic of the ancient portal page?
July 13th, 2009 at 3:43 pm
“Nation’s second-largest newspaper chain”? Uh, huh. Sure, man.
July 13th, 2009 at 4:18 pm
Sorry, Sheltered, we are the nation’s second-largest alternative newspaper chain. I dropped the alt word. My apologies
July 13th, 2009 at 4:19 pm
Paul — I prefer to think of the portal page jpg as “retro” not “ancient,” but it is a fine line between the two
July 13th, 2009 at 8:41 pm
Heard that VVM (Village Voice Media, formerly New Times) is putting together an aggressive bid?
July 14th, 2009 at 8:24 am
Well an auction. Who will be involved? Who will benefit? The St.Pete Times???…. Why not .. For very little money they have an opportunity to dismantle a publication that produces an income stream of lets say $50,000 per week give or take. Now if they spent $3,000,000 and lets say they dismantle the paper and only gain 25% of its revenue ($750,000) per year if they pay $3,000,000 that is a little over a 3 year return of your entire investment ..Wow and you still have 5 other markets that you could sell to bigger publications or give the. To pay back investors.
July 14th, 2009 at 10:31 am
sptr – according to the terms of the auction, anyone can be involved who submits a qualified bid in advance, advancing the Atalaya offer of $2 million in $200,000 increments, and showing the financial wherewithal to come up with the actual full payment (after making a substantial deposit payment).
Your math doesn’t factor in paying creditors out of bankruptcy court, the $12 million note to Atalaya that has to be first serviced and then repaid in full at the end of five years and net vs. gross. I’m not sure we’re an attractive buy for any bidders outside of our own management and Atalaya. Perhaps there are some others in the alt business who would want to make a run at it, we’ll see.
July 14th, 2009 at 3:26 pm
Wayne, got a question. In the event that someone besides Eason/BIA submitted a winning bid, are they bound by the terms of the $12m loan? Or can they negotiate different terms with Atalaya?
July 14th, 2009 at 4:18 pm
Wayne – Maybe St.Pete Times is in contact with Atalaya to strike a deal for the remaining publications as payment for the 12 million. Just saying….what the hell do I know…and remember it is all net to the St.pete times they are already publishing a news paper, this is small money to throw at a med size problem…
July 15th, 2009 at 11:36 am
VVM bid? Lacey or Wayne – any truth to that?