Representatives of Washington City Paper's parent company, Creative Loafing Inc., are today sitting through what is shaping up like a marathon hearing in a Tampa bankruptcy court, according to Wayne Garcia, a correspondent for our sister paper in Tampa. At issue is ownership of the company: Creative Loafing declared Chapter 11 bankruptcy last fall after falling behind in debt payments to its principal lender, Atalaya Capital Management LP.

Atalaya, which is owed $31 million, is seeking to take control of the company and, according to Garcia, is pledging to invest more heavily in the product if it's allowed to do so. An Atalaya rep, reports Garcia, said his firm "would be willing to spend more money to increase revenues at the newspaper chain, but only if it can displace the current management and ownership....Atalaya would seek to publish 'a quality publication' in order to maximize its investment."

In a moment of sheer irony, Atalaya pointed the court to comments on "blogs" as evidence that workers in the Creative Loafing chain were demoralized. A lawyer representing Creative Loafing objected to the admission of such evidence, and the court agreed to disallow it. So there you have it: The publisher of numerous blogs objects to their inclusion in the court record.

Real-time blogging going on right here. I'm in a conference call with my bosses at Creative Loafing Inc. (CL), which owns us, Washington City Paper, as well as five other alt-weeklies. One purpose of the conference call, according to our corporate No. 2 Kirk MacDonald, is to address our "cost structure."

Actually, that's my cost structure. Starting in April, CL will be cutting executive compensation by five to 15 percent. MacDonald said that he and our CEO, Ben Eason, will take the highest percentage cut--15 percent--and others will get more moderate slices. Those others include publishers, sales execs, and top editors at the publications as well as some other corporate types.

I'll learn more about my pay cut after this conference call. When MacDonald first said that we'd be addressing costs, I shuddered to think we'd have to make another round of layoffs. This approach makes way more sense, despite the stress that it places on the company's most wealthy employees. No depressing discussions with the staff today!

Whatever feelings of fraternity and common cause that once glued together Creative Loafing, the star-crossed company that purchased City Paper last year and declared bankruptcy recently, are getting a little less sticky.

First, the bankruptcy. Then last week, Ken Edelstein, editor of CL's Atlanta paper, was canned. Then, as McKenna noted on Friday, John Sugg, a former senior editorial type at the paper, went rogue. He gave some angry quotes to Atlanta Magazine's Steve Fennessy, who's been doing a terrific job documenting the growing weirdness. Then he published a piece in a rival paper (which just publicly offered what may or may not be chump change to buy CL Atlanta) that talked about "CL's ongoing train wreck" and laid blame at the feet of company CEO Ben Eason (with whom Edelstein had some sort of conflagration before he was terminated).

NOW, Mara Shalhoup, a decorated writer at the Atlanta paper, fires back at Sugg, saying his numerous conflicts of interest weren't detailed in that piece.

This would all be terribly entertaining if I weren't wondering whether I'll have health care come Christmas.

Photo of "R.E.M. trestle" by me!

Last Monday, Creative Loafing, the company that owns Washington City Paper and five other papers, announced that it had filed for Chapter 11 bankruptcy. At the time, Creative Loafing CEO Ben Eason said, Chapter 11 was a "natural place for the Company to go to accomplish an orderly reorganization of our finances."

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.

WASHINGTON CITY PAPER FILES FOR CONTENT BANKRUPTCY, SEEKS INJUNCTIVE RELIEF FROM YOU, THE READER

QUESTIONS?

PRESS INQUIRIES?

* 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

So I guess I could have just gone to the big man himself. Earlier today I posted about the confusing, and concerning, documents filed by Creative Loafing, our parent company, in their application for Chapter 11 bankruptcy protection. Well, blogger Rob Capriccioso, aka Big Head Rob, took it upon himself to forward my post to the Loaf's main man, Ben Eason, who CC'ed me on the reply. Thanks, Ben. But I still don't quite get it.

I'd joked that I didn't understand the lingo in the filings. I never took Latin, for one. Turns out Ben doesn't get it either:

I think we’re all getting used to this Chapter 11 lingo. Not sure I know what nunc pro tunc is either. The filings are a little confusing due to the fact that we’re current with all our bills, taxes and payroll but when this weeks bills come in the mail, we’ll update the filing. Additionally, the law requires you to list all the taxing authorities and all the sister companies so this quickly becomes confusing to those who aren’t used to these proceedings.

I'd also expressed some concerns about Eason getting dinged by the court for failing to include a complete list of his creditors and debts. He doesn't explain to the blogger. The way he tells it, we've just run into a bit of a rough patch.

All our pubs are profitable and we’re growing nicely online – we just ran head first into a brutal economy that isn’t showing any signs of getting better anytime soon. The City Paper and CL are doing fine – this just gives us the time we need to keep building out our digital strategies.

In general, the future looks bright. (This is from an earlier email to Rob.)

The trust and presence that City Paper has in the DC market is phenomenal and we think that the combination of DC and Chicago with the CL company give us the national reach to play a significant role in emerging media across the country. We're now able to really get deep into 3 of the top 10 markets in the country and with our brethren in the alternative industry, we're able to compete against the Silicon Valley funded dot coms that are challenging traditional media companies.

Here we come Google, watch out.

Perusing the scanned documents from our parent company's Chapter 11 case, I'm finding a lot of lingo I don't totally understand (PDFs: Emergency Motion to Use Cash Collateral, Emergency Motion for Nunc Pro Tunc Authorization). But hey, here's one I think I get: Notice of Deficient Filing. It appears that Ben Eason's bankruptcy papers were missing a few crucial details, like a statement of financial affairs and a list of creditors with a schedule of liabilities. Eason's initial filing included a list of just the top 20 creditors (PDF: List of Creditors), and only one noted the amount owed: about $83,000 to the Fayetteville Publishing Co. Also missing, how much Eason's attorney will get paid and a case management summary. If Eason doesn't turn in the missing paperwork, the case could be dropped. I have a feeling that would be bad news for us all.

Actually, it looks like they did file a document showing how much the attorneys have already collected: a retainer of $185,000, a bit more than they told us we'd have to cut from the City Paper budget a while back.