Gay newspaper Southern Voice in financial trouble

The future of two publications that serve Atlanta’s gay community may be in doubt because of a federal takeover of assets belonging to the company that owns them.

Southern Voice, a weekly newspaper, and David Magazine have been under the control of the Small Business Administration since August, when a federal judge forced their New York City-based owner, Avalon Equity Fund, into receivership, a form of bankruptcy.

Avalon is the majority owner of Window Media LLC, the parent company of Southern Voice, David Magazine and several other publications that target gay and lesbian readers.

A dozen phone calls and e-mails sent to the companies and publications seeking comment were not returned Tuesday.

According to court records, the SBA pushed Avalon into receivership because the company was losing money and private investors were bailing out. The federal agency had the authority to seek receivership because of its $38 million investment in Avalon.

Under a 1958 law, companies may borrow from the SBA as “small business investment companies,” but cannot have losses that amount to 61 percent of the company’s total private investments. Court records show Avalon’s losses failed to meet that standard.

Thomas G. Morris, who heads the SBA’s Office of Liquidation, refused to comment on the Avalon matter. But Morris said that receivership for a parent company or a majority investor isn’t necessarily a death knell for the companies they own. However, it can delay the possible sale of successful subsidiaries for several years.

“For most companies in liquidation, it doesn’t mean all the assets did poorly,” Morris said. “It’s that the overall portfolio isn’t very good.”