Battle to control Creative Loafing is heating up

Creative Loafing CEO Ben Eason’s largest creditor calls Eason’s bid to keep the company ‘incomprehensible.’

On the eve of the Aug. 25 equity auction that will determine who controls Creative Loafing Inc., Creative Loafing’s biggest creditor is trying to disqualify current CL CEO Ben Eason’s bid. If the creditor, Atalaya Capital Management, is successful, it will automatically win control of the company.

Either way, the rightful owner of the six-newspaper chain will almost certainly be determined tomorrow in a federal courtroom in Tampa, the culmination of a yearlong bankruptcy-court battle that pitted Eason against Atalaya, the investment firm from whom he borrowed $30 million to purchase the Chicago Reader and Washington City Paper in 2007.

This showdown is heating up!

Atalaya’s objection offers a glimpse of Eason’s bid, which it calls “facially incomprehensible.” Neither Atalaya’s nor Eason’s bid — the only two that were accepted by the court — has been made public.

The rules of the auction state that prospective bidders must match Atalaya’s opening bid amount of $2.2 million. Bids can be a combination of cash and “in-kind contributions.” Basically, Atalaya is contesting the contributions portion of Eason’s bid.

If Eason prevails, he will have to pay Atalaya at least $12 million (on top of any amount exceeding a $2.5 million bid at auction). The remainder of the original $30 million loan will be written off.

Here’s Atalaya’s objection to Eason’s bid: