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.
