Creative Loafing files for Chapter 11 bankruptcy protection
Creative Loafing, the Tampa-based company that owns alternative newspapers across the Eastern seaboard and the Midwest, filed for Chapter 11 bankruptcy protection this morning, according to public documents.
The filings list Creative Loafing Inc. and its papers in Tampa, Sarasota, Charlotte, Atlanta, Washington D.C. and Chicago, along with its stake in a newspaper in Birmingham, Ala.
Last year, the company announced a high-profile deal to purchase the Washington City Paper and Chicago Reader. One open question: Did the financial strain of closing the deal push the company into bankruptcy?
Despite a story on the Washington City Paper Web site quoting Creative Loafing Inc. president Ben Eason saying "this filing has little to do with the acquisition," documents included with the bankruptcy filing indicate the company had trouble keeping up with payments on a $40-million debt, including a loan taken last year to pay down $15-million in debts and to purchase the two newspapers.
Company president Ben Eason assured journalists and employees the filing was intended to buy time for completion of its national online advertising network using the Web sites of publications such as Creative Loafing in Tampa, the City Paper and the Reader.
“I’m filing (bankruptcy) because the economy sucks,” said Eason. “The question is, how do we emerge from bankruptcy with a fresh start and everybody getting their debts settled? We believe the answer is in finishing off our digital strategy.”
According to documents included with the bankruptcy filing, Creative Loafing missed an interest payment of $282,219 on Dec. 24, a $10,000 servicing fee on Dec. 31 and an interest payment of $294,369 due Jan. 24.
Also according to the documents, as the media economy grew worse, Creative Loafing negotiated agreements to modify the financing terms with Atalaya Funding in New York and BIA Digital Partners. But last week, Atalaya said the company was in default, though Creative Loafing disagrees, according to the court document.
Creative Loafing has asked the court to prevent Atalaya or Atalaya and BIA from taking control of the company, allowing Eason to focus on reorganizing to better meet its debt obligations and develop the online revenue sources prompting the Reader and City Paper purchases.
“The mood is hopeful here, more than it is doomsday,” said Creative Loafing Tampa editor David Warner, who expects now to focus more on generating material for the paper’s Web site. “There’s a lot of cautious optimism, is the best way to characterize it.”
According to the documents, Creative Loafing describes itself as the second-largest group of alternative publications in the United States, with 2-million unique visitors to its Web sites each month and 1-million print readers each week for six newspapers targeted to consumers aged 18 to 39.
“If the economy was the same now as it was when we put the deal together, we would have hit all our financial objectives and we’d be Wall Street’s darling,” Eason said. I’d be dealing with the same economic issues if I did or did not buy these papers.”
But given the turbulence in the nation’s credit and financial markets, can Eason be sure completing the company’s online plan will bring the revenue it needs?
“We think so…this is an opportunity for a fresh start,” Eason said. “I don’t look at this as a failure or a (a sign) we haven’t been prudent or haven’t been smart.”