A bankruptcy judge in Tampa has ruled that Creative Loafing Inc. can keep control -- for the time being, at least -- of the Reader and the five other alternative weeklies in its chain. The judge rejected a motion by Atalaya Administrative LLC, which is owed $30 million by CLI, asking the court to declare the chain in default and turn the papers over to Atalaya. Instead, CLI, which filed for Chapter 11 bankruptcy in September, was given more time to show that its reorganization plan can work.
The big reason for all that debt is Creative Loafing's purchase 17 months ago of the Reader and its sister City Paper in Washington DC. Borrowing so heavily to do that deal, CEO Ben Eason acted against the advice of his board; and when the economy went south, red ink that would have been hazardous in the best of times became unmanageable. CLI has suffered ever since the sale, and its cost-cutting hasn't spared the Reader: Six more layoffs last Thursday reduced this paper's editorial staff to 17; it was 38 when the old owners sold Eason the paper.