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Bankruptcy auction could break up Creative Loafing

Creative Loafing, the weekly alternative newspaper chain based in Tampa, fears a bankruptcy auction next month could break up the company.

On Wednesday, representatives of Ben Eason, whose family started Creative Loafing more than 30 years ago, appealed to a judge to block its largest creditor from winning the auction.

Eason borrowed about $30 million in 2007 from New York hedge fund Atalaya Capital Management to buy the Washington City Paper and the Chicago Reader. The purchase increased his stable of newspapers to six. (Others publish in Tampa, Atlanta, Sarasota and Charlotte, N.C.)

Eason fears the deep-pocketed Atalaya could blow away other bidders, including Eason, and begin liquidating the company for cash as early as September.

On Wednesday, his team asked Judge Caryl Delano to consider that Atalaya's potentially decisive bid might hurt Creative Loafing and its employees. Delano said she would rule on such matters on the auction day.

Creative Loafing filed for bankruptcy in September, a little more than a year after buying the Washington and Chicago papers. The timing was unfortunate. A plunge in consumer spending stoked by the housing bust shrunk his advertising base at the worst possible time.

Eason and a consortium of investors plan to bid against Atalaya's presumed takeover attempt. To avoid accusations of conflict of interest, Eason floated the idea of stepping down as Creative Loafing's chief executive for the duration of the auction.

Emerging from court Wednesday, Eason appeared more confident than he had been in previous interviews.

"We're going to win," he said.

James Thorner can be reached at jthorner@sptimes.com or (813) 226-3313.

Bankruptcy auction could break up Creative Loafing 07/29/09 [Last modified: Wednesday, July 29, 2009 10:10pm]
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