Investors in Herald deal look to cash out
A trio of investment firms that helped Herald Media Inc. buy a block of suburban newspapers in Greater Boston want to cash out their remaining investment, Boston Herald publisher Patrick J. Purcell said yesterday.
Purcell said he told Boston Herald newsroom employees that he will seek other lenders to replace the investment from the three firms -- Audax Group, Weston Presidio, and Halyard Capital, a subsidiary of the Bank of Montreal -- over the next two months.
The firms financed Herald Media's purchase of a chain of 100 suburban newspapers, mostly weeklies, from Fidelity Investments in 2001.
In July 2004, Purcell refinanced $155 million of the original debt through a package with Wachovia Corp., which allowed him to repay about 85 percent of the principal investment to Audax, Weston Presidio, and Halyard, according to a Boston Herald report last year.
Purcell declined to say yesterday how much Herald still owes those firms. He said the investors always had a ''time horizon" of three to five years on the Herald deal.
''The timeline for our existing equity partners has run its course, and they are looking to move on, and we are looking to replace them," Purcell said.
The Herald said in a press release that it had retained Wachovia Capital Markets LLC and Dirks, Van Essen & Murray as financial advisers to focus on ''recapitalizing the company's existing equity and debt and to explore new strategic opportunities."
Newspaper analyst John Morton, president of Morton Research Inc., Silver Spring, Md., said the investors may have decided the economic climate for newspapers is weakening.
''Generally when you have investment firms like this, they want to get out because they have met their financial objectives or they've decided they are never going to get the kind of return they want, and they want to cash in their chips," he said.
''In light of layoffs, and not-ebullient advertising generally, I suspect they have probably had enough," Morton said.
The Boston Herald disclosed last spring that it wanted to reduce its 145-person newsroom workforce by one quarter. The New York Times Co., parent company of the Globe, said last month that it was cutting 500 jobs, including 35 in the Globe newsroom. Knight-Ridder Inc. said it is seeking to cut 100 newsroom jobs at the Philadelphia Inquirer and the Philadelphia Daily News.
Purcell said he took the unusual step of holding a meeting in the newsroom to avoid any unfounded rumors about the Herald's financial picture, given the troubled times in the industry generally and the job cuts at the Herald this year.
''I wanted to address it up front and make sure there was no kind of uncertainty about what we were trying to accomplish," he said.
Brian Whelan, president of the union representing Boston Herald employees, said Purcell's openness was appreciated. The union, the Newspaper Guild of Greater Boston, approved a contract in April that opened the door for job reductions.
''A meeting like this one was very useful given all the volatility right now in this industry," he said.
Christopher Rowland can be reached at crowland@globe.com. 