According to regulatory filings, hedge fund Alden Global Capital closed its deal for the Tribune on Monday, establishing new leadership and grieving the newspaper chain with a debt of $ 278 million.
Hedge fund Alden Global Capital closed its deal for the Tribune on Monday. According to regulatory filings, it wasted very little time to establish new leadership and tarnish the newspaper chain with a debt of $ 278 million.
Alden, which owns the MediaNews Group newspaper chain and is the second-largest newspaper company by circulation, has a reputation as a ruthless cost-cutter in the pursuit of profits. Transferring the debt to the Tribune’s books creates a concern that the publisher will cut costs which will hurt coverage in the company’s communities. The Tribune’s letters include the Chicago Tribune, the Baltimore Sun, and the Hartford Court. Journalists from the Tribune on Wednesday tweeted that the company was offering voluntary purchases.
The association representing the tribune’s journalists had warned that Alden would use borrowed money to pay for the tribune, a strategy that would limit its ability to invest in its papers, it said. While Alden said in December that it could “fully finance transactions with cash on hand” and “would not require third-party debt or equity,” a filing in April noted that Alden Had the right to finance up to $ 375 million with loans.
Tribune shareholders approved the sale to Alden on Friday, valued at approximately $ 637 million. This ended a tough struggle by the Tribune’s journalists to find alternative local buyers over fears that Alden’s ownership would hollow their papers and signal more newsroom layoffs.
On Monday, Alden transferred a $ 278 million loan to the Tribune, of which $ 60 million was effectively borrowed from Alden himself – technically, from his other newspaper company, the MediaNews Group – at a higher interest rate of 13% On. As of Tuesday’s filing, a unit of private equity firm Cerberus took a $ 218 million loan.
“The Tribune had no debt and could invest cash flow in the improvements,” said Rick Edmonds, Poyntor’s media analyst. “It goes to an extent with new debt.” Still, he said that Alden’s “potential game plan” was cuts, no debt or no debt.
At the end of its first quarter, the Tribune had no debt and $ 250 million in cash, the company said in early May, even as its revenue and staffing levels were steadily declining. The newspaper industry has been shrinking for years as readers are shifting online and companies are cutting into print advertisements.
In a series of reports, the University of North Carolina’s School of Journalism mentions that the “media barons” of this century are investment firms that accelerated newspaper purchases in the crisis following the 2008 recession. These hedge funds and private equity firms typically finance acquisitions with debt and then reduce costs, including layoffs. The report said that profits are invested not in journalism but in debt, management fees and shareholders.
“It would not be unreasonable to predict that Alden will cut its costs to meet these new obligations,” said Ann Marie Lipinski, curator of Harvard’s Neiman Foundation and former editor of the Chicago Tribune. “It is extremely disappointing that the board and key shareholders have not prevented such a painful outcome for employees and the communities in which they work.”
The Tribune itself is no stranger to cost cutting and shrinking newsrooms. Since emerging from bankruptcy in 2012 – a bankruptcy that came after a private take by billionaire Sam Zell and was debt-ridden – its revenues and employees have shrunk. Its annual revenue has fallen by more than half since 2015, and by the end of 2020 its full and part-time workforce stood at 2,865 people, just 40% of its headcount five years earlier.
Alden has also removed Tribune Publishing CEO Terry Jimenez, who publicly opposed the deal, as CEO. The co-founder and chairman of the hedge fund, 41-year-old Heath Freeman, is the Tribune’s new chairman. Freeman generally keeps a low profile but has stated in interviews that the business model of local news was broken and Alden has purchased papers that were “left for dead.”
Alden’s newspapers include the Boston Herald, Denver Post and San Jose Mercury News in its MediaNews group.
Representatives for the Tribune and Alden did not return requests for comment.