Creative Loafing Auction Goes to Judge Today

By: Mark Fitzgerald A bankruptcy judge in Tampa Tuesday could settle the question of who should own the alternative weekly chain Creative Loafing -- the CEO whose family founded the business three decades ago or the investment group that loaned the company tens of millions to expand, only to see the papers end up in Chapter 11 protection?

Judge Caryl E. Delano will apparently have only two bids before her in the equity auction for Creative Loafing, publisher of six alternative weeklies including namesake titles in Tampa, Charlotte, N.C., and Atlanta as well as the Chicago Reader and Washington City Paper.

It was for the purpose of buying the latter two papers in 2007 that Creative Loafing borrowed $30 million from Atalaya Capital Management and another $10 million from BIA Digital Partners. The transaction was particularly ill-timed, with the recession eviscerating ad revenue and placing a crushing debt burden on the group.

Now Atalaya, which has agreed to a reorganization plan that will write down the value of its loan to $12 million, wants to buy Creative Loafing. Its initial offer was reported as $2 million in cash.

Creative Loafing CEO Ben Eason has formed a group, including creditor BEA, that has its own offer of $1.5 million in cash plus free office space.

The Eason side had pressed the judge to set a definition of "best" offer that would not necessarily give all weight to the amount of cash in a bid. However, Delano declined to set any standards in advance of Tuesday's court session.

On Monday, Chicago Reader media critic Mike Miner reported that Atalaya has been reassuring publishers of the Creative Loafing papers that it intends to invest in them.

Former Los Angeles Times Editor Jim O'Shea, a Tribune Co. veteran who was fired for refusing deep newsroom cuts, said he would join the Creative Loafing board and become involved in its journalistic operations if Atalaya's bid is successful.

O'Shea said the interim CEO of an Atalaya-owned chain would be former Des Moines Register President Richard Gilbert.

"I checked out Atalaya," O'Shea told Miner. "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."