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Will Creative Loafing's fate be decided today?



An almost year-long bankruptcy court battle over Tampa-based alternative newspaper chain Creative LoafinglogoLoafing could end today with a local judge's decision on which bid to accept for ownership of the six-newspaper group, which includes newspapers in Tampa, Sarasota, Atlanta, Chicago, Washington D.C. and Charlotte, N.C.

Hanging in the balance: the question of whether current CEO Ben Eason will get to keep control of the company his family founded more than 30 years ago.

Eason's bid is opposed in the bankruptcy auction by just one other -- the company's biggest creditor, Atalaya Capital Management, which originally loaned the company $30-million to purchase the Washington City Paper and Chicago Reader newspapers back in 2007.

The purchases made Creative Loafing the nation's second-largest alternative newspaper chain and furthered Eason's goal of creating a national, Web-based advertising platform. But they also created a towering amount of debt just as the bottom was beginning to fall out of the newspaper industry, and the company eventually filed for bankruptcy in September 2008.

According to Creative Loafing Atlanta, Atalaya has argued that Eason's bid is "facially incomprehensible," saying the source of funds for his contribution are unclear. Eason has tried to argue that he would be the best owner for the newspapers, given his family's history in publishing and the fact that Atalaya is a New York-based hedge fund.

Chicagoreader But the Reader's media critic, Michael Miner, reported on Monday that a partner at Atalaya has been calling the publishers of the six papers to reassure them that the hedge fund does not intend to neglect the chain -- drafting former Tribune Company executive and ex-Los Angeles Times editor Jim O'Shea to join an Atalaya-owned Creative Loafing board.

Miner reported: "O'Shea told me that if Atalaya wins the auction it will put in place as interim CEO Richard Gilbert, a former president of the Des Moines Register. O'Shea has known him for years, and when Gilbert asked if he'd join a reconstituted CLI board, O'Shea said yes. 'I checked out Atalaya,' he told me. 'They seem like people serious about reinvesting in journalism. They know there's no value in this company cutting back — that's already happened. From my perspective they're looking at this very intelligently — they believe in investing in the industry. You can't keep taking things away from your readers and expect them to keep reading.'"

Eason's critics say his penchant for risk taking and unorthodox management style has made the chain's woes worse. But Eason says Atalaya is a company mostly interested in making back as much of its investment as possible and would not be a good steward of the chain.

Whatever happens today -- which could include a decision by the judge to postpone a decision at today's hearing -- it will likely be just the first step in a new chapter for the area's largest alternative newspapers.

[Last modified: Wednesday, July 21, 2010 3:01pm]


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