U.S. media exec joins Postmedia board

Hedge fund with stake in both companies installs AMI CEO in restructuring agreement

A top executive with the company that owns the National Enquirer has joined the board of Postmedia Network Inc. as part of a restructuring move to reduce the debt load of Canada’s largest newspaper publisher. Chatham Asset Management, a New Jersey-based hedge fund that now has an equity stake in Postmedia, asked American Media Inc. executive David Pecker to join Postmedia’s board.

“Chatham is a common investor in Postmedia and American Media,” said Pecker, whose AMI publications include Men’s Fitness, Ok!, Globe and the National Enquirer.

“Chatham has been one of the few hedge funds or private equity groups that has been very, very successful in their investment in print,” said Pecker, who has served as AMI chairman, president and CEO for 17 years.

In a restructuring deal that closed on Oct. 5, Chatham converted its secondlien debt notes into equity in Postmedia. A principal with Chatham Asset Management declined to comment.

Pecker said there was commonality between Chatham’s investment in Postmedia and its other investments in companies such as Lee Enterprises, McClatchy newspapers and American Media Inc.

Like other publications, Pecker said American Media was struggling as it faced double-digit declines in advertising revenues.

“I had a very, very leveraged balance sheet where I was just on the brink myself, four times,” he said.

Pecker credited Chatham, which held American Media’s debt, for turning $125 million (U.S.) in debt into equity, but also restructuring the balance sheet.

“They gave me enough air cover where I could invest in digital; before, I could not get my former private equity partners to invest in digital,” Pecker said.

“And over the last four years, I was able to grow my digital revenue from $10 (million) to $50 million, and that helped me to offset my further decline in print revenue.”

Pecker said his specific experience is one of the reasons Chatham asked him to join Postmedia’s board.

As part of the change, some Postmedia board members have left and two other members were added: Mary Junck, executive chairman of Lee Enterprises and human resources and administration executive Daniel Rotstein.

Postmedia CEO Paul Godfrey said in an interview that American Media and Pecker have no role in the dayto-day operations of Postmedia.

Godfrey said the addition of the U.S. executives is helpful to Postmedia. “It keeps us informed of all the things that are taking place in the United States, in many markets. We are delighted to have them,” he said, adding that the voting structure means the company remains in Canadian hands.

He noted the board additions mean the company is complying with rules that restrict representation of nonCanadians to 25 per cent.

Postmedia had been weighed down by debt, but shareholders and debt holders approved the media conglomerate’s proposal to restructure its $648-million debt last month.

Under the deal, Postmedia’s debt has been reduced by about $307 million, with its annual interest expense cut by about $50 million.

Pecker said he has been impressed with Postmedia including its ad operations and programmatic business, headed up by Andrew MacLeod, who has just been named Postmedia’s chief operating officer.

Pecker hinted that he might consider having Postmedia’s ad operations business handle work for his group down the road.

“Right now, I have an outside service bureau that does my ad operations, which I’m paying them for,” he said. “I was thinking of switching over and using his group,” adding he would pay Postmedia for those services.

He added that the additional liquidity and capital funding from Chatham should help Postmedia to grow its digital business and hopefully offset the continuing declines in print revenues.

Chatham Asset Management issued a separate news release on Oct. 6, saying its funds have acquired 61.16 million variable voting shares of Postmedia Network Canada, which represents about 65 per cent of variable voting shares, or 32 per cent of the voting rights attached to all outstanding voting shares of Postmedia.

Postmedia’s debt has been reduced by about $307 million, with its annual interest expense cut by about $50 million