Newspaper Reorganizing Its Debt

Saddled with too much debt, Tampa-based Creative Loafing Inc., the owner of six alternative weekly newspapers, sought Chapter 11 bankruptcy protection on Monday.

Creative Loafing employs about 270 people and publishes newspapers in Tampa, Atlanta, Charlotte, Sarasota, Chicago and Washington.

The combined weekly circulation is about 425,000, according to papers filed in U.S. Bankruptcy Court in Tampa.

The company owes more than $40 million to about 70 creditors, attorneys for Creative Loafing said. The vast majority of the debt stems from last year's acquisition of newspapers in Chicago and Washington.

The debt, coupled with a souring economy and online advertising trends, led the company to seek bankruptcy protection, said Creative Loafing Publisher Ben Eason.

"The economy that we were basing the acquisitions on is just nowhere to be seen," said Eason, who founded Creative Loafing in 2000.

Advertising revenues have plunged, especially from housing and furniture businesses, he said.

"It caught us by surprise that we were dealing with economic issues," Eason said.

Eason, however, said he doesn't regret the acquisition of the Washington Free Weekly and Chicago Reader in July 2007. "The acquisitions have put us in a good spot," he said.

During the reorganization, Creative Loafing intends to accelerate plans to deliver more news and information over the Internet and via mobile electronic devices.

In addition, the company plans to bundle its online and print products for advertisers, said Dave Jennis, an attorney for Creative Loafing.

"There has not been a drop in readership," Jennis said. "It's simply the economics of print publishing."

No layoffs are planned, and paychecks will be issued to employees on schedule, Jennis said.

In a memo to employees, Eason described the bankruptcy filing as a way to give an "overleveraged company" time to reorganize its debt and establish a greater presence online.

"The assumptions we made have not turned out to be so successful," the memo stated. "The print business has been under siege from all quarters with the exception of the one place that counts; audience."

The company's Web site reaches about 2 million viewers each month, according to court papers.

"This filing has little to do with the acquisition and everyone should feel very proud of what we've accomplished," Eason stated in the memo. "It hasn't been easy, but it has been successful."