Tuesday, July 21, 2009
Media / News Bites Ben Eason discusses what's next for the Reader
Posted by Michael Miner on Tue, Jul 21, 2009 at 1:46 PM
The company that owns the Reader is in bankruptcy court in Tampa trying to hang on to us, and we watch from Chicago spellbound. Who will own us when it's all over?
With $30 million borrowed from Atalaya Capital Management of New York and $10 million from BIA Digital Partners of Virginia, Creative Loafing Inc. bought the Reader and the Washington City Paper from the Reader’s founding owners in July of 2007. “There has never been a more exciting or challenging time to be in the publishing business,” said Creative Loafing CEO Ben Eason at the time. But the purchase was risky in any economic climate, and CLI was headed into the storm that has battered the most solvent newspapers. Last September Eason filed for bankruptcy in order to reorganize.
Atalaya has argued in court that Creative Loafing’s chain of six alternative newspapers shrinks in value with each passing day because of mismanagement, and that to protect what it can of its investment it wants the collateral Eason put up — 100 percent of the CLI stock. On July 13 Atalaya and Creative Loafing agreed on a plan — an equity auction in late August. The stakes in this auction are the papers, and although anyone can bid for them the auction is expected to be a one-on-one. The opening, or “stalking horse,” bid is from Atalaya — $2 million. The opposition will be Creative Loafing, in an alliance with BIA. As the secondary or “mezzanine” lender in the 2007 deal, BIA doesn't stand to recover a single penny until after Atalaya is satisfied; part ownership might strike BIA as a way to salvage something.
Atalaya is in the catbird seat. The first $2 or $3 million raised in the auction will pay back small creditors and provide the company with working capital. But after that the money all goes to Atalaya until it gets back the money it's owed, now about $31 millon. In effect, it can bid that high simply by taking money out of one pocket that it will put back in another. Under the circumstances, how can Eason compete?
I asked him. “You hit on a dilemma we think we can work through,” he said. The key date, according to Eason, is not August 25, when the auction will be held, but July 27 29, when Judge Caryl Delano sets the rules of the auction.
“What the issue really is,” Eason said, “is who’s going to keep their money in. Who’ll be involved in this thing for the long haul. It appears the way Atalaya is coming at this they’ll put their money in and immediately take it out. That’s part of their financial engineering, it’s a typical Wall Street hedge fund being slick with the money. But we’re looking to make sure that whoever bids at the equity auction truly wants to hold the company.”
Do you mean to say the judge could disqualify Atalaya? I wondered.
“She’ll have to decide,” Eason told me. “She wants to open the auction up to basically anybody who is interested in being an owner and caretaker of the assets. And if Atalaya is sitting there with the ability to put money in and take it back out, and put money in and rewrite the terms of the loans, then nobody will show up and bid. Why go through the effort? It’s a foregone conclusion. I don’t think the judge wants to do that.”
Eason believes the judge should award the papers to the “highest and best” bid, which he's ready to argue would be Creative Loafing's. For Atalaya, he told me, “it’s just a deal. For me it’s my passion, my life, and everything. And on the business side, I have to say I think the company has really responded to making the digital transition. I think we’re a third of the way there, a half the way there, and I like the model we’ve created of sort of old media morphing over to new media and using in our sales models the strengths of both mediums. The real key here is not a financial play — it’s how everybody uses their publishing smarts and knowledge of online to fuse those models together. The game is not who’s got the most money but who’s got the most smarts to make the transition.”
But what if the judge doesn’t set rules that restrict Atalaya? I asked him.
“It’s over,” said Eason. “It’s the same thing as a foreclosure.”
UPDATE: Next week's hearing has been moved back to Wednesday, July 29.
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The Chicago Reader is a ulta-liberal rag, it is biased and predudiced-it needs to go the way of all "yellow journalism papers" into the sunset.
Save the Reader! I grew up with this paper and still find it the best source of information around. Since moving to California, I have missed it terribly. Now that I am moving back to Chicago, I rely on it for extended news reports and the classified section. I also have always depended on it for entertainment news. As much as I always found the Tribune great for hard news, The reader was always better and its reporters more hinest and in-depth with their questions.
I agree with Gigi. I was deeply disappointed with the staff reductions at the Reader. But, even so, it remains one of the great humanizing features on the face of the city. It pulls together so much that I find warm and wonderful about Chicago that the experience of living here, for me, would be much diminished if the Reader were to disappear. Please let us know if there's anything we can do (beyond picking up a copy) to help keep you in publication.
What Pelham said. We are better for the Reader's existence -- and its loss would be a crusher for this city.
I agree with Alan, who backed Pelham, who supported Gigi, who endorsed the Reader.
I too hope that this noble publication can be salvaged.
-- MrJM
I think the deeper issue here is what will the Reader look like under Atalaya or under the continued control by Ben Eason. If Eason keeps it, you can be sure the Reader will turn into some version of the chain's Tampa paper (already in the throes of the "digital transformation"), which I guarantee will not be met with open arms in Chicago.
1st reader i picked up had a total of 8 pages.
was standing on lincoln ave in front of an restaurant called, i think, rizzo's...an old guy who looked homeless was handing them out.
which gave me this idea - why not revamp your street distribution system a little?
set up a street wise sort of deal, where the vender gets a little cash, and so does the paper.
i'm not suggesting trying to sell your entire print run in this manner, just in high traffic areas...otherwise it remains free as usual from your boxes/doorway stacks & your circulation numbers/ad rates don't go down.
would be a way of letting the public show support while aiding those in need.
probably wouldn't work, but...
Eason's "digital transformation" is not yet a viable model, and he's further degraded the business' prime revenue generator, print, which was already in decline.
Atalaya has told the judge they've hired a firm with "media experience," Bulkey Capital, which was the same outfit that helpeed the old owners of the Reader and Washington City Paper to sell out to C.L.
Atalaya has probably retained Bulkey to faciliate another sale. Just guessing, but good luck.
@DeBartolo: Not a big deal, but I remember the restaurant. It was "Ratso's," and one of its signature dishes was, in fact, the Ratso "rizzo" -- some kind of grainy stuff that was probably both natural and good for you.
Liked the name. Hated the rizzo.
@alan...no, it is a big deal, i love blasts from the past - i remember now - thanks...ratso rizzo was that brown rice dish they were known for which i also loved - back in the days when no one knew what the hell brown rice was.
the only other memory of ratso's i have is that aliotta, haynes & jeremiah always used to hang out there & mooch weed from fans.
I worked at Ratso's as a salad-prep and bus-boy back in 74 or 75 and remember aliotta, haynes & jeremiah as well. They joked about know only about 3 chords but they were good. Saw some great groups for free while working, I remember Gatto Barbieri and The Fine Arts Quartet. Anyone out there see either of those?
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