Buffeted by steep debt payments, the Creative Loafing (CL) newsweekly chain–owner of Washington City Paper–filed for bankruptcy protection last September. Ben Eason and other top CL executives at the time expressed the standard laments about a depressed ad environment, seismic shifts in the media marketplace, a crushing debt load, etc.

The bankruptcy proceeding has touched off a scramble among CL’s main financiers–Atalaya Capital Management & BIA Digital Partners–for control of the company. Atalaya, which is currently about $31 million dollars in the hole on the deal is making its second play for the company–arguing in court that the newspaper chain’s value is withering away as the group continues to be mismanaged. Meanwhile, BIA has formed an alliance with CL in order to fight for control of the company’s stock through an equity auction agreement.

According to CL, the key date in the case is July 27th when a judge will set the rules of auction.

“We’re watching all of this very closely, almost to the point of distraction,” said Washington City Paper Editor Erik Wemple. “I guess the question is whether it’s better to be under the control of hedge fund managers or our current arrangement. That’s the topic of somewhat pointless debate around here. The bottom line is that no matter what happens in court, there are still stories out there to report and write.”