Chicago Sun-Times – The Chicago Reader, the local alternative weekly, is now under the control of Atalaya Capital Management, a New York-based hedge fund with no previous experience running newspapers.

At a bankruptcy auction in Tampa on Tuesday, Atalaya successfully bid $5 million for the Reader and five other alternative weeklies that comprise the Tampa-based Creative Loafing Inc. alternative newspaper chain. Atalaya beat out Creative Loafing CEO Ben Eason for control of the six newspaper properties.

Creative Loafing got into debt trouble when it borrowed roughly $40 million in 2007 to buy the Reader and the Washington (D.C.) City Paper — $30 million of it reportedly from Atalaya. The company filed for Chapter 11 bankruptcy protection in September 2008.

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Tags: alternative weeklies, atalaya capital management, bankruptcy auction, capital-management, chapter 11 bankruptcy, chicago reader, debt trouble, hedge fund