Advertisement

Delivering Community Power CUPW 2022-2023

Postmedia shoots more hostages to keep debt payments flowing to New Jersey hedge fund

More bad news could be coming soon if Ottawa doesn’t keep the bailout money coming to stop the newspaper chain from sinking

Media Canadian Business

New Jersey’s largest newspaper chain shot another dozen Canadian hostages last week as the end game of its northern extortion scheme grows ever closer. If the federal government doesn’t allow Postmedia Network and the rest of the country’s press to start taking money from the pockets of Google and Facebook soon, more of the country’s captive newspapers could get whacked. That’s because the Jersey boys have just about bled dry the chain that owns most of Canada’s largest dailies. Its latest financial report shows that Postmedia is sinking fast, and it could take most of Canada’s press with it.

The former Southam newspaper chain was acquired out of bankruptcy in 2010 by New York hedge fund Goldentree Asset Management, which had bought up most of its debt on the bond market at pennies on the dollar. It kept the debt on the renamed company’s books so it would be paid first every month, then took over the country’s second-largest newspaper chain, Sun Media, in 2014. Goldentree sold out to New Jersey-based Chatham Asset Management two years later in a deal that “happened so quietly,” noted the New York Times, “that Postmedia’s own financial news site described it as a debt restructuring in a report that included a single mention of Chatham as ‘one of the investors.’” That fast move flew right over the head of comatose regulators in Ottawa. “Few people noticed,” added the Times, “including some of the chain’s employees.” The deal wiped about $300 million of debt off Postmedia’s books but raised its foreign ownership to a dizzying 98 percent, with Chatham alone holding 66 percent.

Foreign ownership of Canadian newspapers is supposed to be limited to 25 percent, but the hedge funds got around that by taking the company public and selling shares on the stock market. It issued two types of shares, with those held by foreigners limited in voting power to supposedly give the few Canadian shareholders control. It’s a ruse, of course. The Globe and Mail reported in 2014 that Postmedia management didn’t make any major moves without calling the company’s hedge fund owners first.

Meet the new boss, not quite the same as the old boss. At least Goldentree could boast a Park Avenue address. Postmedia’s latest hedge fund master is more the New Jersey badda bing, badda boom variety with a warning. “Nice newspaper company ya’ got here. Be a shame if anything happened to it.” Under Chatham’s ownership, the Times noted, 1,600 Canadians—or 38 percent of Postmedia’s workforce—were laid off in just four years. The real change, however, came as Postmedia “centralized editorial operations in a way that has made parts of its 106 newspapers into clones of one another.” Just last year, it bought the Irving newspaper group that dominates New Brunswick.

Under Chatham’s ownership, the traditionally progressive Southam newspapers have veered hard right politically following a head office edict to become more “reliably conservative.” Their pages have become filled with so-called “native advertising,” which is designed to look like news but is actually paid content. Some of it is even paid for by the government with your tax dollars, as Senator Percy Downe discovered a few years ago after reading about the Canada Revenue Agency’s success in tracking down overseas tax evaders, which he knew was far from the truth.

Then there is the rampant climate change denial spread across Postmedia’s opinion pages. It might be explained in part by a deal Postmedia apparently made with the Canadian Association of Petroleum Producers almost a decade ago, which has since seen much space devoted to the need for pipelines to crisscross British Columbia and tankers to cruise the west coast. Racist opinion articles prompted a revolt by journalists at Postmedia’s Vancouver Sun a few years ago and staff at its National Post to unionize. I could go on and on, but you’ll have to wait for my book The Postmedia Effect to be published in April.

The latest Canadians to lose their livelihoods in order to enrich the American money men are Prairie folk. Postmedia announced that it will stop printing a dozen of its Alberta community newspapers next month and move them to digital-only publication with reduced staff. It also sold its Calgary Herald building for $17.25 million to U-Haul, which will convert it into storage lockers. It will outsource printing of its Saskatchewan dailies, put its Saskatoon StarPhoenix building up for sale and sublease its rented Regina Leader-Post premises, leaving its employees there to work remotely from now on.

Postmedia and other Canadian newspapers have been kept alive by bailout after bailout since 2018, when a $50 million Local Journalism Initiative was introduced to boost reporting in under-served communities. That wasn’t enough for the press bosses, who howled for more, even hiring a Liberal insider to lobby Ottawa. It paid off with a five-year $595 million bailout that began in 2019. The LJI was supposed to end last year, but Ottawa recently extended it and threw in another $40 million just for good luck.

Bill C-18, the Online News Act, which is currently before the Senate, would force digital platforms like Google and Facebook to pay Canadian news media an estimated $329 million a year for linking to their news stories, but Facebook is balking. Even if it does pass, News Media Canada (the national association of the Canadian news media industry) is apparently also asking for the bailout to be made permanent, as its head recently told a publishers’ group that Bill C-18 “cannot save the media alone” and that government support “should be maintained.”

Postmedia may need it just to stay afloat because of the debt that still weighs it down but makes the hedge funds rich. The company officially went under water last year, as its operating earnings were only $13 million while its debt payments totaled $31 million, which may help explain the asset sales. Its poor performance epitomizes the Canadian newspaper industry’s malaise since it went on the government dole. My recent research on the UK newspaper industry, which didn’t get a bailout, shows that they are doing better than they have in years, perhaps because it forced them to innovate. Postmedia is instead following the “harvesting” strategy favoured by hedge funds, in which they simply strip the company of its assets. That’s why they are often called “vulture capitalists.”

Postmedia’s government shakedown strategy isn’t working too badly, either. That’s why you might see them start throwing out more hostages soon if the feds don’t keep bucking up. Ya’ know, to sleep with the fishes. Capiche?

After this article was published, Postmedia held a company-wide meeting in which it announced that 11 percent of its roughly 650 journalists would be laid off in the next 24 hours.

Marc Edge is a journalism researcher and author who lives in Ladysmith, BC. His books and articles can be found online at www.marcedge.com.

Advertisement

BTL Glasbeek leaderboard

Browse the Archive