Tuesday, August 25, 2009

Atalaya outbids Eason, assumes control of Creative Loafing

Posted By on Tue, Aug 25, 2009 at 3:47 PM

click to enlarge ben-eason.jpg

Atalaya Capital Management this morning doubled Creative Loafing Management’s bid to retain the alternative newsweekly chain, ending months of legal wrangling and 37 years of control by the Eason family.

Michael Bogdan, managing partner of the winning New York-based hedge fund, said he is committed to keeping the chain’s 230 employees and 400,000 readers in six cities.

“We are here for the long haul and we want to make this work,” Bodgdan said minutes after Federal Bankruptcy Judge Caryl E. Delano accepted Atalaya’s $5 million cash bid.

Creative Loafing bid $2.32 million in cash and other securities. The deal is expected to close within 10 days.

Bogdan and other Atalaya officials are tentatively set to meet Wednesday morning at the Marriott Waterside with publishers and other managers from the papers in Tampa, Sarasota, Atlanta, Charlotte, Chicago and Washington, D.C.

At least one upcoming change will involve moving the Tampa offices from the Eason family-owned building at 810 N. Howard Ave. Atalaya has until Oct. 31 to leave the building, and Bogdan said he isn’t worried about finding new space.

Attorneys for Creative Loafing worked into the night to make the case that it was submitting the “highest and best” bid for the troubled media company.

After an hour or so of preliminaries, Judge Delano offered both sides an opportunity to break before the auction got underway. Both sides said they wanted to press forward, and the proceeding began with the $2.32 million bid from Creative Loafing.

“Atalaya bids $5 million,” responded attorney Tyler Brown on behalf of the hedge fund.

“We’ll take that intermission now,” Creative Loafing attorney Bart Houston immediately replied.

Atalaya had just sent a clear message that it wouldn’t be outbid, and Creative Loafing wasn’t in any position to try, having had to cobble together its bid from various sources, including deferred compensation.

The only remaining question was whether Judge Delano could be dissuaded from Atalaya’s “cash is king” argument to consider other factors, such as what is in the best interest of employees or the community’s quality of life.

But Judge Delano made it clear that she wasn’t going to be moved by such arguments.

“The only thing I could look at is which company has the most money,” she said. “There is not a hint that Atalaya is going to dismantle this because that is antithetical to Atalaya’s best interest.”

Creative Loafing owed $31 million to Atalaya and $10 million to BIA Digital Partners. The money was used to reduce debt and purchase the Chicago Reader and the Washington City Paper in 2007. The chain filed for bankruptcy 11 months ago when it was unable to make loan payments.

Atalaya had agreed to write-down its promissory note to $12 million.

Ben Eason (pictured above), Creative Loafing’s now former chief executive, said the migration of classified advertising to the Internet from print was the main reason for Creative Loafing’s financial problems, not buying the Chicago and Washington, D.C. papers.

“If classified advertising goes away, debt doesn’t matter,” he said. “We would have been in financial difficulties anyway. Any company that has debt on the old model is going to have trouble."

Eason vowed to start a new enterprise within days.

“Clearly it will be digital,” he said, “but I’m still a big believer in print.”

Bogdan is surrounding himself with people rich in media experience on the board of the new company. Other members include former Los Angeles Times editor Jim O'Shea, who generated headlines over his refusal to cut newsroom staff; RIchard Gilbert, a former executive with the Des Moines Register, and the Pioneer Press in suburban Chicago; and Michelle Laven, formerly of the New Times alternative weekly chain and currently at Clear Channel LA.  Elaine Clisham, formerly of the Village Voice and the American Press Institute will also advise the board, Bogdan said.

The new owner said he will visit each of the properties in the near future.

"I don't think there will be anything dramatic in the near term," he said. "We want to listen. We want to know where people excel, and where they are having problems."

Bogdan said he doesn't think it's possible for the company to go to an all-digitial format.

"It's not feasible to completely abandon print," he said. "That is not our goal right now."

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