This is just one motion in CLI’s Chapter 11 bankruptcy case, so the larger battle for control will continue if the judge rules against Atalaya’s motion. Bankruptcy attorneys I’ve spoken to say it’s unusual for a “debtor-operator” (such as CLI’s current management) to loose control at this relatively early stage in the game.

If DeLano rules in favor of Atalya, the New York-based hedge fund promises to bolster operations.

If  current CEO Ben Eason retains control, he says he’ll move forward with his “Digital Transformation Strategy,” which calls for continuing to shrink the papers. He’ll have to continue to use the company’s resources to battle for his interests in bankruptcy court.

(Beware, my bias: Eason fired me as part as Creative Loafing editor in Atlanta over cuts he wanted to make to Editorial Department.)

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The investment fund that is the main creditor of Creative Loafing Inc. would keep its six papers going and pump more resources into them than current management has been willing to spend, the fund’s media specialist testified today in U.S. Bankruptcy Court today. But only if CEO Ben Eason and the rest of the team that got Creative Loafing into its bankruptcy mess were forced out.

From CL/Tampa’s Wayne Garcia:

Atalaya partner Michael Bogdan testified that the firm has hired another investment banking firm with media experience, Bulkley Capital of Dallas, Texas (with an office in Atlanta, the home of CL’s largest newspaper) to advise it and provide “management assistance” in running the CL papers if it is successful in court today.

… Bogdan said his investment firm would be willing to spend more money to increase revenues at the newspaper chain, but only if it can displace the current management and ownership. He said Bulkley is familiar with alt-papers and advised the Chicago-DC paper owners in their 2007 sale to CL. Bogdan said Atalaya would seek to publish “a quality publication” in order to maximize its investment. He also said the lender is concered about the CL workers. “We’re concerned with the morale of the employees,” a fact Bogdan said he gleaned from “reading in blogs.” Federal Bankruptcy Judge Caryl E. Delano disallowed the blog-related testimony after an objection from CL’s attorney, David Jennis.

Bulkley sounds as if he’s set up to help manage and sell media companies rather than to shut them down. This undermines the public claims of CLI CEO Ben Eason that Atalaya would shutter the papers if it wrested control from him.

In case you didn’t know, Eason fired me in November for urging him to cut his administrative staff a wee bit before continuing to axe Sales and Editorial. So, consider my reporting on this with that in mind.

Still, facts are facts: Eason’s own Bankruptcy filings show that he’s cut both Sales and Edit, while he’s failed to cut the General & Administrative budget that includes his salary and those of the people closest to him. The result has been disastrous, particularly in Atlanta, where the print product is now regularly smaller than the upstart Sunday Paper. And now Eason’s  claim that Atalaya would shut down the papers — rather than try to get its investment back by operating it or selling it — sounds even less credible.

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