Tuesday, August 25, 2009

Creative Loafing equity auction is underway!

Posted By on Tue, Aug 25, 2009 at 2:37 PM

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In case you haven't heard, today is equity auction day!

Creative Loafing reporter extraordinaire Thomas Wheatley is in sunny Tampa to cover what might be the final chapter in Creative Loafing Inc.'s yearlong bankruptcy saga. Wheatley's first update is posted a little further down — hold on! — and he will continue to offer dispatches throughout the day.

First, to bring you up to speed: The auction pits current CLI CEO Ben Eason, whose family founded Creative Loafing 37 years ago, against Eason's biggest creditor, Atalaya Capital Management, from whom Eason borrowed $30 million to buy the Chicago Reader and Washington City Paper in 2007. Eason has said the burden of the loan forced him to seek Chapter 11 bankruptcy protection last year.

If Eason prevails, he will have to pay Atalaya back at least $12 million (on top of any amount exceeding a bid of $2.5 million or higher). The remainder of the $18 million owed Atalaya — if there is any — will be written off.

Wheatley reports that Eason's opening bid is $2.3 million, including $825,000 cash and the remainder in "in-kind contributions." Yesterday, Atalaya filed a motion contesting the contributions, but the judge ruled this morning that they were admissible. Atalaya then reserved the right to challenge them later today.

Following Eason's opening bid, Wheatley reports, Atalaya upped the ante: $5 million cash, on top of including the $2 million cash and $1 million line of credit it already promised in its own opening bid.

Eason's attorney then asked for a brief break.

Now, for a little more background:

If Atalaya wins, the New York hedge fund will create a board manned by some impressive names in national journalism, including ex-L.A. Times editor Jim O'Shea, the Reader reports. O'Shea was fired from the Times after he resisted the publisher's demands to cut the editorial staff. By bringing him on, Atalaya could be adding substance to its promise to reinvest in CLI's six papers, which compose the nation's second-largest altweekly chain.

(Photo by Joeff Davis)

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