The New York-based investment company that owns a majority stake in the publishers of Southern Voice and David Atlanta is in federal receivership and being sued by the Small Business Administration.

The SBA may sell the media properties as its dissolves the assets of Avalon in September 2009, according to a Feb. 6 story from Gay City News in New York. Avalon is an investment fund that owns majorities in Window Media, which publishes Southern Voice, and Unite Media, which publishes David. The media companies own several other gay publications, including the Washington Blade, Genre, New York Blade and South Florida Blade.

Avalon, which owns a stake in the company that publishes the New York Blade and HX, was licensed by the SBA as a small business investment company (SBIC) in 2000. Through 2007, it borrowed just over $38 million from the federal agency to invest in gay media properties and a range of other ventures.

As part of its contract with the SBA, Avalon was required to have private money or assets in the fund from sources, such as individual investors, that had a value equal to half the amount it borrowed from the SBA or just over $19 million.

In 2007, the SBA wrote Avalon that it had a “condition of capital impairment” because the value of its private assets had fallen below the required level.

The percentages cited in the lawsuit suggest that Avalon had little or no capital left as private investors were pulling their money out, businesses owned by Avalon were losing money, assets in the fund lost value, or some combination of the three.

Avalon and Window did not respond to a request for comment from Gay City News.

The story did note that a typical receivership takes more than three years and that the SBA recovers 63 cents on the dollar for investors and taxpayers.

Given the current economic climate, the Avalon sale may take longer and recover less.

“I think it is fair to assume that liquidations will be a little bit slower and for a little bit less,” said Tom Morris, director of SBA’s Office of Liquidation.

Southern Voice, founded in 1988, was purchased by Window Media in 1997. David Atlanta launched in 1998 and was purchased in 2003 by Unite Media.

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