Today's equity auction should be the culmination of nearly a year of bankruptcy court proceedings for the six-paper company. Creative Loafing (Atlanta) is reporting that creditor Atalaya Capital Management is trying to disqualify the other bid for the company, which has been put together by CL CEO Ben Eason. Atalya, calling Eason's bid "facially incomprehensible," is arguing that the sources for contributions included in Eason's bid "are not clear." Meanwhile, the Chicago Reader reports that Atalya managing partner Michael Bogdan has been calling CL publishers to assure them the hedge fund doesn't want to run the company into the ground. On the call to Chicago, Bogdan was joined by former Los Angeles Times editor James O'Shea, who would become a CL board member if Atalya wins control of the company. O'Shea tells Michael Miner that Atalya would make former Des Moines Register president Richard Gilbert interim CEO upon taking over.
"Creative Loafing's bankruptcy is just one more media story to follow, along with the Sun-Times Media Group's bankruptcy and the Tribune Company's bankruptcy," Michael Miner writes. "But CL's is the story I'm part of." He explores the difficulties of "reporting on your own house" as a media writer, and explains why he kept news of Reader layoffs off his blog for four days -- and didn't name any of the departing staffers -- just days after he had broken news of layoffs -- with names -- at Chicago Public Radio. "I have no explanation that will satisfactorily answer this question," he writes. "The fancy one I'll retreat to is one word long: epistemology. You see, it's not simply what journalists know that matters to us but also how we happen to know it. I knew what happened at WBEZ because I got a tip and worked the story; I knew about the Reader because it's home."
Yesterday was the deadline for interested parties to submit their bids for Creative Loafing, Inc. to a bankruptcy court judge. According to a document filed yesterday, all bidders will be provided with the details of opposing bids by noon today. UPDATE (1:50 pm): Creative Loafing (Atlanta) is reporting that Eason's team and creditor Atalaya Capital Management will be the only two bidders at next Tuesday's auction.
No surprise here: Creative Loafing CEO Ben Eason and the company's largest creditor Atalaya Capital Management both tell the Atlanta Journal-Constitution they have high hopes for next week's auction of the company in Tampa bankruptcy court. "I think we are absolutely the best bid," Eason says. "Any bid has got to have cash, management and know-how, and be in a position to run the business and pay off debt. ... We have all of that." But Atalaya managing partner Michael Bogdan begs to differ. "We are going to come into court with a bid we believe will prevail," he says. "And if somebody starts with higher bid (sic), we are absolutely willing to raise our bid." It's expected that Atalya will bid a higher dollar figure than Eason's group, but Eason has said he will ask the judge to consider publishing expertise as part of deciding what the "highest and best" bid for the six-paper company is. The auction is slated for Tuesday, Aug. 25.
The Creative Loafing CEO tells the Chicago Reader he is working on a bid for the company that consists of three components: Eason and his family; BIA Digital Partners, who CL owes $10 million; "and managers from all across the company." Eason says the idea is to couple the pay cuts taken by the 25-30 managers with an offer of equity in the company and a chance to join the bid. "If it loses, Eason says, they'll be paid their deferred salaries out of auction proceeds," the Reader reports. "Managers who remain on the sidelines will get paid back either way." The idea is one way Eason hopes to set his bid apart from the bid expected from Atalaya Capital Management, CL's main creditor. He hopes the show of unity will impress the bankruptcy judge, who will hold the auction for the six-paper chain on Aug. 25. "You've got managers clearly invested in the business, in continuing to run the business, and in looking to keeping it going," Eason says. MORE: In other CL news, a Chicago blogger gives his in-depth analysis of the company's value.
In today's bankruptcy hearing, the judge said she will wait until the Aug. 25 equity auction to define what the "highest and best" offer will be, a decision that CL CEO Ben Eason has said will be of utmost importance to the future of the six-paper company. "While today's hearing about the rules and procedures for the bidding was given a pretty high-drama buildup ... it didn't live up to its billing and was actually a complex, confusing, and undramatic court session," Creative Loafing (Tampa)'s Wayne Garcia writes. Following the hearing, Eason told Garcia he's considering stepping down temporarily as CEO to focus on putting together a new bid for the company, though he said he hasn't made a decision yet and has no timetable in mind.
CL CEO Ben Eason has said that today's hearing (rescheduled from Monday) will likely determine whether or not he will be able to retain control of the six-paper chain. The actual auction is slated for Aug. 25, but Eason says that if the judge allows unfettered bidding by Atalaya Capital Management, the company's largest creditor, he may have no chance. He thinks that would be unfair and will ask the judge to restrict Atalaya's ability to bid. "What you'll see is the judge grappling with a core issue: How do you preside over a fair auction where one of the bidders has an advantage that would cause others not to bid," Eason says. "It's like pulling money out of one pocket and putting it into another."
Ben Eason tells the Chicago Reader that the key upcoming date in the ongoing bankruptcy saga of Creative Loafing is not Aug. 25, when the auction will be held, but July 27, when the judge sets the rules of the auction. He says the judge should restrict the ability of lender Atalaya Capital Management to bid on the company because "they'll put their money in and immediately take it out." He says that the issue should not just be who has the highest bid for the company, but the "highest and best" bid, which Eason thinks will be his. "For me it's my passion, my life, and everything," he says. "The real key here is not a financial play -- it's how everybody uses their publishing smarts and knowledge of online to fuse those models together. The game is not who's got the most money but who's got the most smarts to make the transition."
New Media Hub reports that Creative Loafing has trained some reps to buy and resell ad networks for key local display advertisers. CL joins Village Voice Media, which launched its Voice Local Network in June, in selling local ad networks. VVM new media director Bill Jensen says the company's network focuses on advertisers that align with the papers' main areas of focus, which helps set it apart from other ad networks. "When you are looking for music or a restaurant, things that are at the core of our business, you are looking for a little bit more than text ads," Jensen says. "We have the best food critics in the world. Its different if you are looking for a plumber."
A federal bankruptcy judge scheduled the auction for Aug. 25 after Creative Loafing CEO Ben Eason and the chain's largest creditor agreed on a reorganization plan, reports Creative Loafing Tampa's Wayne Garcia. Under the plan, Atalaya Capital Management LP will take a $19 million haircut, writing down the value of the loan it made two years ago to Eason to $12 million. Atalaya still plans to battle Eason and his allies for ownership of the company and has already put in a $2 million "stalking horse offer" that constitutes "the first bid up during the Aug. 25 equity auction," according to Garcia.