This reminds me of Terri Schiavo: Creative Loafing bankruptcy day 3

I just got back from a 10-hour day in bankruptcy court covering Creative Loafing CEO Ben Eason’s bid to keep control of his embattled chain of alt-weeklies. I won’t do much re-capping since there is little news to report: lawyers spent the day questioning Creative Loafing‘s Chief Financial Officer and their hired business valuation expert. Although many of us expected Judge Caryl Delano to make a decision this evening, as the testimony wore on she informed the court her decision will come in a week or so. My former colleague Wayne Garcia has a good overview of the latest facts here.

The basic situation is this: Creative Loafing‘s main debt (approx. $30 million) is to a firm called Atalaya, which ponied up about $30 million for Eason’s purchase of alt-weekly legends Washigton City Paper and Chicago Reader. After Creative Loafing declared bankruptcy last September, the court put an automatic stay on Atalaya’s right to put the newspaper chain in default (and take it over). Atalaya has filed a motion to end that stay. Their reason? Bankruptcy is significantly harming the Creative Loafing newspaper chain and they must take it over in order to prevent the further erosion of their investment.

In testimony over the last two weeks, Atalaya is trying to convince the court that Creative Loafing has lost more than $7 million in value since the bankruptcy. Creative Loafing maintains they lost much of the company’s value before the bankruptcy and since then, have remained fairly stable.

Interesting tidbit from today:

Even if Ben Eason keeps control of his company, his future projections put the company on a much smaller profit margin for the next 10 years. In fact, even by 2018 (the limit of his future projection) Creative Loafing will never be as profitable as it was before the bankruptcy.

Except for a few nuggets of info, the entire court experience today was mind-numbing. For nearly five hours, the valuation expert, Michael Mard of the local Financial Valuation Group, explained the minutiae surrounding standard valuation practices, appraisal methods and how he came up with his numbers. Then, the lender’s lawyer poked holes in his statements.

The whole time I kept wracking my brain for a good analogy to explain the nuances of the case; I didn’t come up with it until my ride home:

Creative Loafing is like Terri Schiavo.

I know, I know — this might seem like a stretch, but check it:

In the Terri Schiavo case, both her family and husband agreed that Ms. Schaivo was in bad shape. No argument there. She had been diagnosed as being in a permanent vegetative state for years. And, just like in Creative Loafing‘s case, both sides knew, no matter what, she’d never be the same woman again.

But while the husband (Atalaya) wished to pull to the plug on the whole matter and start anew, her family (Eason) insisted she wasn’t that bad off and maybe even getting better!

Back to Creative Loafing:

According to Ben Eason’s testimony last week, Creative Loafing has lost circulation, page counts, ad revenue, staff and profit margins. It went from the second largest chain of alt-weeklies to one that has hemorrhaged millions in less than a year. Atalaya says the game is over, while Eason reassures the court. Don’t worry, he says, we have a new digital transformation plan — “Look! Her eyes are moving!” — and the company is bound to bounce back by 2018!

I don’t mean this analogy to mean Creative Loafing‘s survival is hopeless — miracles do happen — but the paper’s fate, like Ms. Schiavo’s, now lies with the courts.

Full disclosure: In case you missed the dozens of references in this blog, I worked for Creative Loafing from May 2006 – January 2009. I’m not bitter, just cynical.