American Media, and its Affiliates, Files for Bankruptcy

On November 17 the Boca Raton, Fla., publisher, American Media, and 15 of its affiliates, filed for Chapter 11 protection, as reported in the Wall Street Journal's business section.

The filing was made with the U.S. Bankruptcy Court in Manhattan.  The publisher listed debts from $500 million to $1 billion.  The operations subsidiary of the company lists their assets between $100 million and $500 million and the parent company listed assets of less than $50,000.

The popular National Enquirer Incorporated magazine is one of the 15 affiliates listed.  American Media, and its subsidiaries, also publish other magazines such as Star, Men's Fitness and Shape.

The company had reached an agreement with holders of 75% of its bond debt, and secured lenders holding more than 70% of its bank debt, before they entered into the Chapter 11 filing. 

American Media stated that the bankruptcy is the next stage of its financial restructuring.

The company also stated that while no plan was filed with the court on Wednesday afternoon, they have a pre-packaged bankruptcy plan.

American Media's press release stated that their restructuring plan will give the bondholders the publisher as their property. 

The bondholders that would gain ownership are Capital Research, hedge funds Angelo Gordon and Company, and Avenue Capital Group - all of these also hold large equity stakes in the publisher.

Avenue and Angelo Gordon, per American Media, have taken "an active leadership role in supporting the process by 'putting additional money into' the company."  They each hold 20% of the company's shares.

Additionally, Capital Research holds approximately 30% of the company's shares.

With this new deal unsecured trade creditors are to be paid in full and secured lenders will be getting a combination of both cash and new debt.

Per court papers, American Media is taking on a $565 million new first-and second-lien debt to finance its emergence from bankruptcy.

AmericanMedia has listed three groups of bondholders - owed a collective $388 million - as its largest unsecured creditors.  Behind that group is a $2.1 million debt to Gould Paper Corp. and an additional $1.4 million in debt to R.R. Donnelley & Sons Co.

Generoso Pope Jr. started the National Enquirer in the 1950s and moved the tabloid's operations to Florida from New York in the 1970s.  When Pope died in 1988 his heirs sold his company jointly as an investment for Boston Ventures and MacFadden Holdings Inc.

Evercore Partners purchased the company in 1999.  When the company also purchased Weider Publication a few years later, Thomas H. Lee Partners had also joined the group.

By January of 2009 American Media restructured due to its heavy debt load.  It was then that 95% of the company's equity was transferred over to its bondholders.

If you are considering filing for bankruptcy, click here to contact a bankruptcy attorney in our directory to learn how best to proceed.