• Home
  • About me: Jim Fitzpatrick
  • Contact

JimmyCsays: At the juncture of journalism and daily life in KC

Feeds:
Posts
Comments
« Mike Sanders, Tiger Woods and that ever-shrinking company that owns The Star
A scenario — albeit unlikely — for getting The Star out of the newspaper desert »

The sharks are in the water. Their new prey of choice? Failing newspaper chains.

September 15, 2018 by jimmycsays

This news falls into the “expect-the-unexpected” category.

The Chicago Tribune reported yesterday that McClatchy Co., The Star’s corporate owner, was one of two companies looking at acquiring the former Tribune Publishing group, which nows goes by the name Tronc.

Tronc owns 10 newspapers, including the Chicago Tribune, the Baltimore Sun, the Hartford Courant, the Orlando Sentinel and the South Florida Sun-Sentinel.

The Trib’s story is a head scratcher because every bit of speculation I’ve heard has been in the direction of whether debt-ridden McClatchy might consider selling out or if it might be headed toward bankruptcy.

To see a story, then, suggesting that McClatchy might be a buyer simply stifles the imagination.

But today I did a little digging, and I’d like to lay out a few facts that should put that seemingly fanciful prospect in proper context:

:: If McClatchy was involved in an acquisition — and it’s still a long way from taking place — McClatchy as we know it, a company that owns and operates 29 daily newspapers, would not be calling the shots.

:: Pulling the levers would be a hedge fund called Chatham Asset Management, Chatham, NJ, which over the last year has become McClatchy’s largest shareholder (20 percent) and biggest creditor. Institutional Investor magazine has described Chatham as a firm that invests in companies with “distressed debt.”

:: Five years ago, Chatham snapped up a majority ownership position in another deeply indebted media company, American Media Inc. If that name sounds familiar, it’s because it owns the National Enquirer, which has been in the news lately for having purchased the rights to, and then killing, sexual-dalliance stories that could have derailed Donald Trump’s presidential campaign.

:: Chatham’s managing partner is a shadowy figure named Anthony Melchiorre, a former junk bond trader at Morgan Stanley. (Standard & Poor’s lists 16 grades of “investment-grade” bonds, from AAA to B minus. After that come the junk bonds.)

:: Melchiorre ‘s partner in the American Media bailout was billionaire hedge fund manager Leon Cooperman, whom the U.S. Securities and Exchange Commission two years ago charged with insider trading. Last year, to settle that case, Cooperman paid the government $4.9 million in fines and penalties and also agreed to an independent compliance monitor at his fund.

…Taken together, those facts do not paint a hopeful picture of two once-proud newspaper chains combining forces to become a bigger and better company.

I don’t think Melchiorre and Chatham have any interest whatsoever in high-quality journalism or have any realistic expectation of seeing McClatchy’s and Tronc’s papers make a successful transition from print to digital. What I see, instead, is the worrisome specter of an avaricious hedge fund operator potentially moving in for a bone-marrow extraction of two downtrodden companies.

**

If I was younger and more naive or if I had a nice pair of rose-colored glasses, I might adopt a wait-and-see attitude and be inclined to give Chatham Asset Management the benefit of the doubt.

But we’ve already got a living-color example of what happens when a hedge fund gets into the newspaper business.

I wrote about it in May in a post titled, “You think it couldn’t be worse than McClatchy? Sure could. And maybe pretty soon.”

One possible outcome I speculated about was The Star and the other McClatchy papers being bought by Gannett, the largest newspaper chain in the country. Gannett has trashed its papers, starting with the paper I grew up with, the Louisville Courier-Journal.

I’ve got zero confidence in Gannett.

Another possible outcome I pointed to was a hedge fund buying McClatchy. I cited the case of one hedge fund, Alden Global Capital, having purchased MediaNews Group in 2012, after MediaNews declared bankruptcy.

One of MediaNews’ foremost papers is The Denver Post, which, like The Star, has been hit with devastating layoffs and is a shadow of its former self.

With MediaNews, Alden has engaged in a process called “harvesting market position,” that is, bleeding the papers of revenue and putting nothing back in.

According to The Columbia Journalism Review, a group of Alden shareholders filed a lawsuit in May alleging that Alden “had sucked money out of the newspapers it owns in order to make risky investments in Greek sovereign debt and a troubled pharmaceutical chain, among other areas.”

The journalism review quoted news industry analyst Ken Doctor as saying the suit “provides unusual visibility into the nest of secretive vultures.”

At this point, I don’t see any indication that Chatham Asset Management is anything but a secretive vulture.

**

Up top, I mentioned that McClatchy was one of two groups believed to be looking at acquiring Tronc. The other is an investment group formed by another former hedge fund manager, a man named William Z. Wyatt.

Looks to me like the hedge fund boys are lurking in the water, angling like sharks to get their teeth into what remains of at least two failing newspaper chains…The more I see, the more I think there’s very little chance of a hopeful outcome for our Kansas City Star. On the other hand, I refuse to give up all hope; maybe a miracle is in the works, somewhere.

Share this:

  • Twitter
  • Facebook

Like this:

Like Loading...

Related

Posted in Uncategorized | 5 Comments

5 Responses

  1. on September 15, 2018 at 9:19 pm John D Altevogt

    How unfortunate that a profitable newspaper like The Star couldn’t sue for a “divorce” from a corporate owner that is bleeding it dry to cover for mistakes made elsewhere.


    • on September 15, 2018 at 9:44 pm jimmycsays

      So true.


  2. on September 16, 2018 at 9:24 am Steve Porter

    Astounding reporting, something we should be getting from the Star, the Wall Street Journal or the Kansas City Business Journal – but we’re not. Greed doesn’t just murder truth, it dismembers the body and feeds it to the hogs.


    • on September 16, 2018 at 9:55 am jimmycsays

      Thank you, Steve…(And that’s a pretty astounding sentence you wrote about greed.)


  3. on September 17, 2018 at 1:36 pm Gloria Hiller

    Excellent research Jim!



Comments are closed.

  • Pages

    • About me: Jim Fitzpatrick
    • Contact
  • Archives

    • February 2023
    • January 2023
    • December 2022
    • November 2022
    • October 2022
    • September 2022
    • August 2022
    • July 2022
    • June 2022
    • May 2022
    • April 2022
    • March 2022
    • February 2022
    • January 2022
    • December 2021
    • November 2021
    • October 2021
    • September 2021
    • August 2021
    • July 2021
    • June 2021
    • May 2021
    • April 2021
    • March 2021
    • February 2021
    • January 2021
    • December 2020
    • November 2020
    • October 2020
    • September 2020
    • August 2020
    • July 2020
    • June 2020
    • May 2020
    • April 2020
    • March 2020
    • February 2020
    • January 2020
    • December 2019
    • November 2019
    • October 2019
    • September 2019
    • August 2019
    • July 2019
    • June 2019
    • May 2019
    • April 2019
    • March 2019
    • February 2019
    • January 2019
    • December 2018
    • November 2018
    • October 2018
    • September 2018
    • August 2018
    • July 2018
    • June 2018
    • May 2018
    • April 2018
    • March 2018
    • February 2018
    • January 2018
    • December 2017
    • November 2017
    • October 2017
    • September 2017
    • August 2017
    • July 2017
    • June 2017
    • May 2017
    • April 2017
    • March 2017
    • February 2017
    • January 2017
    • December 2016
    • November 2016
    • October 2016
    • September 2016
    • August 2016
    • July 2016
    • June 2016
    • May 2016
    • April 2016
    • March 2016
    • February 2016
    • January 2016
    • December 2015
    • November 2015
    • October 2015
    • September 2015
    • August 2015
    • July 2015
    • June 2015
    • May 2015
    • April 2015
    • March 2015
    • February 2015
    • January 2015
    • December 2014
    • November 2014
    • October 2014
    • September 2014
    • August 2014
    • July 2014
    • June 2014
    • May 2014
    • April 2014
    • March 2014
    • February 2014
    • January 2014
    • December 2013
    • November 2013
    • October 2013
    • September 2013
    • August 2013
    • July 2013
    • June 2013
    • May 2013
    • April 2013
    • March 2013
    • February 2013
    • January 2013
    • December 2012
    • November 2012
    • May 2012
    • April 2012
    • March 2012
    • February 2012
    • January 2012
    • December 2011
    • November 2011
    • October 2011
    • September 2011
    • August 2011
    • July 2011
    • June 2011
    • May 2011
    • April 2011
    • March 2011
    • February 2011
    • January 2011
    • December 2010
    • November 2010
    • October 2010
    • September 2010
    • August 2010
    • July 2010
    • June 2010
    • May 2010
    • April 2010
    • March 2010
  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 563 other subscribers

Blog at WordPress.com.

WPThemes.


  • Follow Following
    • JimmyCsays: At the juncture of journalism and daily life in KC
    • Join 563 other followers
    • Already have a WordPress.com account? Log in now.
    • JimmyCsays: At the juncture of journalism and daily life in KC
    • Customize
    • Follow Following
    • Sign up
    • Log in
    • Copy shortlink
    • Report this content
    • View post in Reader
    • Manage subscriptions
    • Collapse this bar
 

Loading Comments...
 

    %d bloggers like this: