Marty Petty, the former publisher of the St. Petersburg Times and the Hartford Courant, was named this morning chief executive officer of the Creative Loafing chain of alt-weeklies.

Petty's hiring comes at a time of transition for the Creative Loafing papers. In late August, a bankruptcy proceeding forced an ownership change in the chain, taking it out of the hands of former owner Ben Eason and placing it with Atalaya Capital Management, a hedge fund that was Creative Loafing's primary creditor. To manage the newspapers, Atalaya hired a management team that Petty will oversee. The chain has papers in Washington, Chicago, Atlanta, Charlotte, Tampa, and Sarasota.

According to a company press release, Petty said, "I'm invigorated by the possibilities to deepen relationships with our readers and advertisers and expand our influence in our communities. The coverage areas which have differentiated and distinguished the alternative press historically may be more important than ever."

UPDATE 1535: Creative Loafing chain sold to biggest creditor for $5 million (Atlanta Journal-Constitution)
UPDATE 1459: Washington City Paper Now Owned by Atalaya Capital (DCist)
Atalaya outbids Eason, assumes control of Creative Loafing (Creative Loafing Tampa)
UPDATE 1332: Hedge Fund Atalaya buys Creative Loafing in equity auction (Tampa Bay Business Journal)

UPDATE 1256: New York equity firm snaps up Tampa's Creative Loafing (Tampa Tribune/TBO.com)

UPDATE 1240:Chicago Reader Has New Owners (Chicago Reader)

UPDATE 1236:Tampa's Creative Loafing chain taken over by hedge fund Atalaya (St. Petersburg Times/tampabay.com)

UPDATE 1229: Atlanta Creative Loafing says Atalaya won.

UPDATE 1223: Chicago Reader calls it for Atalaya.

UPDATE 1218: Unconfirmed Twitter chatter is that Atalaya has won.

In Tampa, Fla., Judge Caryl Delano has begun the process of deciding who will own Creative Loafing, the newspaper chain that purchased Washington City Paper and the Chicago Reader in July 2007 and filed for Chapter 11 bankruptcy 14 months later. Creative Loafing CEO Ben Eason is bidding for the company, as is Atalaya Capital Management, which loaned Eason $30 million toward the original purchase.

Here are some links to current stories about the proceedings; I'll update them as new information becomes available.

Creative Loafing Auction Goes to Judge Today (Editor & Publisher)

Creative Loafing equity auction is underway (Creative Loafing Atlanta)

Reader Bidder Would Bring Jim O'Shea Back to Chicago Media (Chicago Reader)

Creative Loafing's publisher may lose chain of weeklies today (Tampa Tribune/TBO.com)

Will Creative Loafing's fate be decided today? (tampabay.com)

Battle to control Creative Loafing is heating up (Creative Loafing Atlanta)

Our wacky company. Jesus, our wacky company. Today was the day a judge in Florida was due to decide how best to conduct an equity auction next month that'll presumably end our company's nearly yearlong journey through bankruptcy. She kind of punted.

But: Talk about burying the lede! Following the ruling, Creative Loafing CEO Ben Eason said he was considering stepping down as CEO to, as Wayne Garcia reports, "focus on formulating a new equity bid for the post-bankruptcy company."

This leaves us without a CEO. And in the absence of an obvious candidate, may I suggest our own City Lights editor, Mike Riggs? Some points:

• Riggs is a Floridian, so Tampa, with its strip clubs, Hooterses, and insatiable appetite for Shawn Alff posts, would not present any cultural problems for him. In fact, last year Riggs held his birthday party at Hooters. Clinton Portis was there.
• And he's got ideas! On budget issues, Riggs writes: "Fly less. This is America, 2009, not Rome, 100. CEOs can govern via free teleconferences, instant messaging, and Skype. Also, in the case that travel is unavoidable, this company needs someone who can ride the rails and make use of their surroundings. I've read Travels with Lizbeth and can spot a safe head of lettuce in a dumpster full of syringes. Also: couch surfing. Hosts would be treated to one (1) comped soda per trip."
• On advertising strategy: "No one's got this down. I read somewhere that papers across the country are making less money this year than last year. Step one: Offer perks to advertisers and assume that we can afford them. Like in that episode of The Office, when Michael Scott offers the company's biggest client 50% off its massive paper order. Essentially, we would offer something 50% off, but probably not ads. Might even delegate the ad question to an expert, so long as the expert was willing to offer advice for $0.05 per pageview."
• On the transformation of journalism: "New media is my bread and butter. Twitter? Facebook? Social bookmarking? I know all about them. I'm probably going to make a tweet in about five minutes. First things first: No more paying for new media training. Young people use this stuff instinctively–I bet one or two of them would love to teach a bunch of grizzled newshounds the ins and outs of Digg, just for resume padding! Also, writers/bloggers in house/freelance would be contractually obligated to promote their own material. I'm not even kidding about this. Write post, email it to four people who are not your mom or roommate or your mom's friend. Boom. Traffic. Relationships. Social networking."

Riggs also has some worse ideas, but I'm trying to plead his case here. He's young! He's energetic! He's got "Stand Up & Raise Hell" tattooed on his chest! Judge Delano, what more do you need?

Photograph by Lilly Sadler

Eason is about 22 months ahead of Pulitzer-winning columnist

In this morning's Washington Post, columnist Steven Pearlstein tries to make the case that buying up a bunch of newspapers could be a fantastic business decision. Pearlstein's piece comes in the format of a letter to Berkshire Hathaway's Warren E. Buffett, who is bearish these days on newspapers. The longtime investment guru sees them as sources of "unending losses."

But wait! Pearlstein sees hope. He cites the examples of devalued assets such as the Los Angeles Times, the Rocky Mountain News, the Chicago Tribune, and the Boston Globe.

What to do about them? Pearlstein has an idea:

From an investment standpoint, the better way to look at these properties is to think of buying all of them. In a single stroke, and with a relatively modest amount of money, a strategic buyer could assemble a national syndicate with millions of readers capable of achieving the economies of scale that have, for the most part, eluded our badly fragmented industry. And with the near-death experience of these papers still fresh in the minds of readers and employees, a forceful new owner would have an opportunity to offer a different set of products based on a different and more sustainable business model.

Pearlstein then goes on to sketch out a biz model that, somehow, doesn't smell all that different and sustainable from the one that's been tanking all over the country for the past several years.

What really struck me about Pearlstein's proposal, though, was, Hey, that's what we tried!—nearly two years ago. In 2007, Creative Loafing CEO Ben Eason essentially executed a Pearlstein, as applied to the world of alternative newsweeklies. Eason bought the Washington City Paper and the Chicago Reader in a move to extend the brand of his four southern Creative Loafing papers. Throw in an alliance or two with some West-coast alt-weeklies, the thinking went, and you'd have a national platform for ads and audience.

As we in the Creative Loafing family have discovered, and as Pearlstein seems bent on ignoring, a newspaper is a newspaper is a newspaper. It gets tougher and tougher each week to wring revenue out of these machines, for a number of reasons that have been amply covered everywhere. Just a thought for Pearlstein: Perhaps the fewer number of newspapers you own, the better off you are. Creative Loafing is now in Chapter 11 bankruptcy.

Even so, I felt a surge of pride in my company this morning. It's kind of nice to have a Pulitzer Prize-winning mind endorse your company's business model, however dented it may be at this point.

This move was occasioned by a dispute between Creative Loafing and its biggest creditor, New York- and Atlanta-based Atalaya Capital Management, which loaned Creative Loafing Inc. (CLI) $30 million to purchase City Paper and the Chicago Reader last year and to pay down $15 million in debt that CLI already held. (CLI also borrowed $10 million from BIA Digital Partners in Chantilly, Va., when making the purchase.)

As collateral, Eason pledged his voting shares (he owns 100 percent of the company's class A stock).

Yesterday, as Atlanta Magazine's Steve Fennessy first reported, Atalaya filed an objection to CLI's "emergency motion" for a temporary restraining order, claiming that Eason's stock was owned by him alone, not the company, and as such was outside the scope of CL's bankruptcy. Further, Atalaya contested CLI's assertion that Eason "provides the vision and direction for the Debtors’ viewpoints of various issues, including social, political and cultural, that are occurring in each of the Debtors’ communities."

Yesterday, Judge Caryl Delano of Tampa, Fla., where the case is in motion, disagreed with Atalaya.

Had the company been successful, it would have been able to essentially take over Creative Loafing. "It was a legal maneuver they were doing to get more control," says Eason, speaking from his office in Tampa.

"When we filed the bankruptcy," he says, "there was a concern that Atalaya or BIA might use the collateral as a part of the bankruptcy to come in the backdoor and use the shares to basically foreclose on the shares and function as the board of directors."

Atalaya says Eason is not the "only employee or officer of the Debtors capable of managing the business" and that CLI hasn't “suggested that Mr. Eason will contribute anything in the way of credit, money, or property to fund any proposed plan. Mr. Eason will contribute only his time and energies for which the Debtors have proposed that he continue to receive a significant salary and potential bonus.”

In one particularly memorable section of the filing, Atalaya gives examples of companies in Chapter 11 whose sole proprietor was "the only person who can run the business": one was the only physician at his chiropractic clinic; another was "the only person with trade secret knowledge of how to process codfish in the Caribbean." (Note: I am now desperately trying to work the phrase "it's hardly processing codfish in the Caribbean" into my everyday speech.)

Eason calls this "a bit of an aggressive move." He characterizes the first 10 days of the bankruptcy, as "Day 1" hearings, when the court unfreezes the company's assets one by one—its ability to use its bank account, its ability to pay employees, freelancers, vendors, etc. He characterizes these hearings as "Can we turn the lights back on?

Yesterday's ruling was part of what Eason calls "Day 2 proceedings." He says CLI now has "a total timeout for 110 days," during which time CLI management will get a reorganization plan together. "Essentially...the initial set up is done," he says.

UPDATE (FRIDAY, OCT. 10; 6:15 P.M.): Via Tyler Brown, an attorney for Atalaya, this statement.

Atalaya Administrative, LLC, ("Atalaya") is the agent for the lenders who hold the senior secured loan outstanding to Creative Loafing, Inc. ("CLI") and its affiliates, which are debtors in chapter 11 cases in the U.S. Bankruptcy Court in Tampa, Florida.  Atalaya is owed in excess of $30 million by CLI.

Atalaya believes that the bankruptcy filing was unfortunate and unnecessary. It is very important that management of CLI continue to operate the business in the ordinary course and that the bankruptcy have as little negative impact on CLI's operations, employees, customers and vendors as is possible. Atalaya wants the business to succeed and, despite whatever court actions may be required to protect Atalaya's interests, wants to assure all interested parties that Atalaya has no intention of attempting to shut down the business. Atalaya believes that the business can succeed with the right management and business plan in place.

* Headline of Politico's VP debate preview makes me giggle. Plus: We watch for the crashes:

With all their potential for pitfalls and insta-classic moments, the pair has made the build up to the showdown, to take place here Thursday night at Washington University, feel more like a NASCAR race than a serious political forum: the audience may be tuning in as much in anticipation of cringe-inducing pile-ups as they are to watch the typical parry-and-thrust of debate.

* The Onion, on the other hand, makes me cringe.

* Financial bailout: U.S. Senate tries, tries again, this time with "higher tax breaks, FDIC limits," reports the Washington Post: "The Senate last night easily approved a massive plan to shore up the U.S. financial system, but the measure faces a tougher test tomorrow in the House, where leaders will try to reverse the stunning defeat the legislation suffered earlier this week."

* Some inside stuff: Atlanta Magazine's Steve Fennessy, a veteran of City Paper owner Creative Loafing, lends some valuable insight into the inner workings of CL and CEO Ben Eason, who Fennessy calls "a tireless networker with a love of jargon." The piece details a history of the Eason empire and its plans for the future. I'll say this: Despite the bankruptcy crunch, Creative Loafing employees and alums have been producing some great work about Creative Loafing lately.

* Catch up on Wonkette's gchat interview with "Washington's Only Wasillan." Spoiler: She's a sarcastic liberal! She's also boring enough to have to block during daytime hours to prevent that incessant gmail "ding" from disrupting your office banter. Pay $25 tonight to hang out with her at an Obama fundraiser at James Hoban’s, 1 Dupont Circle NW.

* And in this newspaper (still here!):

- Delaney, Greenwood, Janssen, and Wemple gang up on the Washington Nationals: Take my ticket, please!

- In Loose Lips: the Nats' finances are fucked, too.

- Tricia Olszewski on Bill Maher's Religulous and teenage love adventure Nick and Norah's Infinite Playlist.

- The debut of our new real estate column, Ruth Samuelson's Housing Complex.

Photo by Jeff Kubina