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A bankruptcy judge in Tampa has spoken, and the Reader is now owned by an investment fund in New York. "We certainly believe that between ourselves and the folks we're bringing in, we can provide the financial and human resources necessary to bring this company to the next level," I was just told by Michael Bogdan, managing partner of Atalaya Capital Management, an hour or so after Atalaya successfully bid $5 million for Creative Loafing Inc. in a bankruptcy auction.
What about getting it back to the old level? I asked Bogdan.
"That'll work too," he said.
CLI borrowed $40 million, $30 million of it from Atalaya, and bought the Reader and the Washington City Paper from the Reader's founding owners in 2007. It was an enormous debt, taken on recklessly as newspapers entered an era of collapsing revenues, and CLI couldn't handle it. Last summer CLI filed for bankruptcy; and Atalaya was soon arguing in court that CEO Ben Eason and his ownership team were running the company into the ground. Give us the papers, the firm told Judge Caryl Delano, and we'll do better.
On Tuesday Delano did so, rejecting Eason's argument that the biggest bid wasn't necessarily the best bid—that the Eason family's long history with Creative Loafing made Eason's team the better bet to see the papers into the future. Eason could only come up with a $2.3 million bid, and Delano passed it over.
"We're not going to say we'll own you guys forever," Bogdan told me. "That is not what investment funds do. But we'll be living with you guys for a while."
So the Reader will be fattened up, and eventually sold. To whom? "We haven't thought about it," said Bogdan. "It's absolutely our intention to run it. The Reader's a great publication and we want to make it even better."
He's put together a management team led by Richard Gilbert, a former president of the Des Moines Register and of suburban Chicago's Pioneer Press. Joining Bogdan and Gilbert on a new Creative Loafing board will be James O'Shea, former managing editor of the Tribune and editor of the LA Times. O'Shea has been reading the Reader for years, and he has a lot to say about what it is, what it was, and what it could be.
"In our analysis," he says, "the cuts at the Reader were disproportionately made in editorial and in sales. I always saw the Reader as a place for good longer-form journalism, good investigative stuff. I think it lost some of that under Creative Loafing. Whenever you start cutting people and cutting resources, it shows."
"Right now a paper like the Reader really has an opportunity, because the dailies are slipping. There's a major opportunity in investigative reporting because the dailies are simply not putting the emphasis they used to in investigative reporting. They're watchdogs and all that stuff [an observation clearly aimed at his old paper, the Tribune], but it's more like TV investigative reporting. It's limited. It doesn't have quality and depth. It makes a lot of noise but it doesn't have the authority a good solid investigative piece can have."
Ben Eason brought the management teams from each of the papers to Tampa for the auction today, excluding the editors. Bogdan and other Atalaya officials plan to meet with those teams tomorrow. They also plan to make the rounds soon to talk to the people who work for them and find out what they need. And a meeting with all the publishers in being planned for mid-September in Chicago.
But CL employees who like what they're hearing from Atalaya need to remember it's a fund out $30 million that's now operating the chain of papers it lent the money to and hoping to recover its investment; it's not a deep-pocketed idealist willing to lose millions in the name of some greater good. But, says O'Shea, Atalaya believes Eason cut too deeply trying to service his debts, and that "prudent and wise investments" are now probably in order.
He will find editors at the Reader inclined to agree.