Daily News spinoff stirs anxiety after Alden takeover

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Rapid-fire changes underway at newspapers sold to cost-slashing hedge fund Alden Global Capital have led to a profound case of the jitters at newsrooms like the New York Daily News.

On Monday, Daily News staffers were hit with the first bout of potentially bad news when they were told via memo that they had been spun off into a separate subsidiary of Tribune Publishing called Daily News Enterprises.

The baffling move, which doesn’t appear to have been replicated at any other Tribune paper, came the same day Alden fired Tribune CEO Terry Jimenez, the lone board member to oppose the Alden takeover.

Concerns were only heightened after Alden Global offered buyouts to non-unionized workers at the Daily News and eight other metro dailies, including the Chicago Tribune, the Baltimore Sun and the Hartford Courant.

The Chicago Tribune reported that the new owners had contacted the paper’s representatives at the NewsGuild union to discuss voluntary buyouts for journalists, but then canceled a bargaining session in the wake of its $633 million takeover.

Such moves have especially stirred angst at the News, which laid off 98 people, including half of its entire newsroom back in 2018, under the old ownership. It’s now down to just under 65 newsroom staffers.

As one former insider put it, “What’s left to cut?”

The pandemic has whacked the circulation all newspapers. But circulation at the Daily News has plunged far faster than others.

And while local buyers had sought to buy other newspapers in the chain, nobody stepped up to try to buy the Chicago Tribune or the Daily News. Both papers have huge pension liabilities and experts say potential new owners were skittish.

Any new owner is likely to be fearful of getting stuck with an enormous tab in the event the enterprise has to be sold or shut down.

Media Ink could not learn exactly how high the pension liabilities are at the Daily News. Several sources estimated they could be close to $100 million. But another said it could be as low as $20 million.

One reason for the range, according to some pension experts, is the potential for a pension shortfall compounded by termination fees and other penalties that come when a company tries to withdraw from a multi-employer pension plan.

In some ways, the pension liabilities, while they discourage buyers, also may make it too expensive to close down, since shutdown costs will likely exceed the operating loss.

“It is entirely possible, even likely, that it will be more expensive to shut down a business than to operate it at a modest loss,” said Harvey Katz, a partner and pension specialist at the law firm Fox Rotchschild LLP.

Daily News staffers were worried that by singling it out as the only entity among the nine major metro dailies to be spun off into its own subsidiary, it was being set up for a potential shutdown.

The Daily News building
The facade of what was once Daily News headquarters in Midtown Manhattan. The paper sold more than 2 million copies daily during its heyday.
Getty Images

But Katz said if a profitable company were to set up one of its struggling units as a separate company, the parent company would still be left holding the bag. “Moving it to an entity that has only losses will be set aside by the courts,” said Katz.

Some of the most elderly pressmen and truck drivers go back to the days when the Daily News was the biggest newspaper in the country, selling more than 2 million daily copies and nearly 5 million on Sunday in the boom era in the 1940s and ’50s.

All daily papers in the metro area saw print sales decline during the pandemic. But the Daily News lost readers at near triple the rate of The Post and double the rate of the Times. Its weekday print circulation dropped a staggering 33.5 percent to 67,983, down from 102,281 in the same period a year earlier.

Fred Drasner, a former partner with Mort Zuckerman who exited in 2004, commented, “Under 68,000 copies a day? They used to steal more copies than that from me each day.”

On the new ownership, Drasner said, “If they were bought by a ruthless cost cutter, I guess there will ruthless cost cutting.”

The News also enacted a steep price hike to $3 a copy, which has led to speculation that Alden, which had 32 percent of the stock and three seats on the Tribune board prior to its takeover, had been deliberately trying to crash circulation to justify abandoning print down the road.

Heath Freeman
Heath Freeman, now head of Alden Global Capital, at a 2011 event.
PatrickMcMullan.com

Heath Freeman, the 41-year-old president of Alden, is the sole voting shareholder in the new company.

Daily News editor-in-chief Robert York addressed some staffers’ questions at a remote Zoom meeting Tuesday, but could not offer a reason for the spinoff into a separate subsidiary, sources said.

York did not return emails seeking comment. A Tribune spokesman had also not returned calls.

In one of its last public filings, Tribune disclosed that Cerberus has loaned Alden $218 million in part “to finance the merger” of the formerly debt-free company.

Alden also controls newspaper chain Media News Group — also known as Digital First Media. Media News holdings — from the Denver Post to the Boston Herald and the San Jose Mercury News — have also been hit with deep cuts in the Alden era.

To finance the latest deal, Alden’s MNG Enterprises Inc. loaned $60 million to its parent hedge fund at the sky-high interest rate of 13 percent.

Calls to Alden Global Capital were not returned at the time of writing.

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