Creative Loafing chain sold to biggest creditor for $5 million

The Eason family’s 37-year-old Creative Loafing publishing empire came to an end Tuesday morning when a Tampa bankruptcy judge awarded the struggling chain of six alternative weekly newspapers to its biggest creditor, a New York-based private equity company, Atalaya Capital Management LP.

Atalaya bid $5 million for Creative Loafing easily trumping the $2.3 million bid of Ben Eason, the newspaper’s CEO, who has been trying to hold onto the chain since it filed for bankruptcy last September to avoid defaulting on loans.

Eason had hoped, going into the auction, that Federal Bankruptcy Judge Caryl E. Delano, would heavily weigh the experience he and his family had in running Creative Loafing, now based in Tampa, a counterculture weekly his mother Deborah Eason launched in Atlanta in 1972.

Instead, Delano declined the request of Eason and his attorneys — after hearing the size of the bids — to hear arguments that Eason and the Creative Loafing management team were better suited to reorganize and run the newspapers profitably.

The paper’s financial problems started in 2007 when Ben Eason borrowed about $40 million to buy the Washington City Paper and Chicago Reader newspapers to extend his chain’s national reach and attract more advertisers.

Then the economy slumped and industry-wide newspaper ad sales at the chain, which has about 400,000 weekly readers, plunged. About $30 million of its debt is owed to Atalaya which was heavily favored to win the bid.

Michael Bogdan, a partner in Atalaya said “We’re excited that this is over, it’s good to put this behind us. We look forward to adding resources and continuing to build this business and move forward.”

He said the company would take control of the chain immediately and publishers from the six-city chain — Atlanta, Washington, D.C., Sarasota, Tampa, and Charlotte — who were in the courtroom Tuesday, would meet Wednesday to begin plotting strategy to build readership and restore profitability.

“We do not plan any layoffs,” said Bogdan.

Mara Shalhoup, a senior editor and one of a team of four editors who manage the Atlanta Loaf’s 13 person staff, said Tuesday there was “relief” in the newsroom after hearing Atalaya had won the bid because the paper may be more financially sound.

“But I would stop short of calling it a celebration,” she said, “because the Eason family has owned this paper for three decades.” She said Ben Eason, who will not be a part of the new management team, was going to issue a statement to the staff but, by early Tuesday afternoon, he had not.

“I don’t know if I will see him in this place again,” she said.