Creative Loafing’s bankruptcy case nears its end

The lines are drawn and the date set: On August 25, Creative Loafing, its creditors Atalaya and BIA Digital Partners, plus any other interested third parties, will meet for an equity auction that will determine the ownership of the country’s second largest alt-weekly chain.

After 10 months of ups and downs for the embattled company, Creative Loafing may finally see some finality by the end of the summer. In a court hearing today, U.S. Bankruptcy Judge Caryl E. Delano approved CEO Ben Eason’s fourth attempt at a reorganization plan and set dates for the next round of hearings to determine the ownership of the newspaper chain. At the end of July, the interested parties will meet to approve bidding rules in the coming equity auction. Then, if all goes as planned, the auction and confirmation hearing will occur on August 25 at 10 a.m.

So far, Atalaya is proposing $2 million to start off the bidding; according to Creative Loafing sources, Eason is offering up $500,000 plus an estimated $1 million in free rent for the newspaper’s offices in Atlanta. The trick for Creative Loafing is beating Atalaya’s seemingly deep pockets. Remember: this is the same company that loaned a starry-eyed Eason $30 million to buy the Chicago Reader and Washington City Paper. But then again, a lot can happen between now and the end of the equity auction.

An interesting side note: The auction is not limited to just BIA, Atalaya and Ben Eason; third parties can also bid on the company. (If anyone out there knows of any organizations that express interest let me know.)

Meanwhile, Creative Loafing continues to plod through the woes befalling any newspaper. In Tampa, the company’s “digital transformation strategy” is in full swing and being met with criticism by readers and advertisers. Also, Creative Loafing‘s chief operating officer (and the Chicago Reader‘s most recent publisher) resigned at the end of June. And most importantly, the company’s budget for the next fiscal year is due by the end of summer and some rumblings from inside CL offices suggest the numbers are not in the black.

Considering the company has already trimmed the fat and muscle from operations, the only way to save money now would be further cuts in staff.

UPDATE (July 14, 2009): Turns out I was right about the cuts in staff. Read it here.

UPDATE (July 22, 2009): The Chicago Reader has a nice short piece on how CEO Ben Eason plans to retain control of the company. Basically, he is hoping the judge approves his equity auction terms that state the company should go to the highest and best bidder. Eason’s plan is to convince the judge that Atalaya is just a hedge fund looking to close the papers and Eason will bring Creative Loafing Inc. into digital nirvana. Check out the Reader blog here.