Eason keeps control
Creative Loafing’s seemingly endless dirge continues.
A bankruptcy judge ruled today against a motion by the company’s main creditor to take control from CEO Ben Eason. That means the battle for control between Eason and Atalaya Capital Management will continue through most of April in U.S. Bankruptcy Court in Tampa.
At the same time, Judge Caryl Delano fired a warning shot at Eason and his lawyers. The company’s plan to pull itself out of Chapter 11 protection is an “uphill battle,” she said, and Eason would be wise to seek mediation with Atalaya, a New York-based hedge fund that lent $31 million to Eason in 2007.
At least for now, however, mediation doesn’t appear to be in the cards. According to Tampa Creative Loafing’s Political Whore blog:
Although it was a strong win for the current CL management, Delano also struck a cautious tone, saying that she believed the company has “an uphill battle” ahead to have any reorganization plan confirmed by the credits since Atalaya is far and wide the biggest creditor and could choose to vote against any plan. Delano suggested mediation for the two sides, but after a 30-minute recess in which the two sides’ lawyers talked by telephone, the idea of having a mediator appointed was tabled for now, at least until April 20 when Creative Loafing reveals more details of its reorganization plan, including possible new investors.
As mentioned earlier, this isn’t entirely unexpected. Bankruptcy courts generally rule in favor of the debtor-operator (in this case, Eason) before the court gets a chance to rule on the company’s proposed plan. That means the company will continue to be saddled by bankruptcy costs for the time being.
Next chance to get out of this mess: April 20.
CL ruling today
Creative Loafing Inc. management, employees and creditors will find out shortly after 2 p.m. who will control — for the time being — the parent company of CL/Atlanta and five other weekly newspapers. That’s when Bankruptcy Court Judge Caryl Delano has scheduled an announcement of her decision on a motion by the main creditor, Atalaya Capital Management, to effectively take control of the company.
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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