Before Bezos Fight, Enquirer Publisher AMI Faced Steep Losses
(Bloomberg) -- The publisher of the National Enquirer, currently under attack by Amazon.com Inc. founder Jeff Bezos, has been facing steep financial losses that have left the once-loyal keeper of Donald Trump’s secrets with more than $1 billion in debt and a negative net worth.
The closely held American Media Inc. -- led by the president’s longtime friend, David Pecker -- recorded a $31.5 million loss in the six months that ended Sept. 30, according to documents reviewed by Bloomberg. That marked an improvement over the previous year, but nonetheless brought the company’s total losses over the last 5 1/2 fiscal years to $256 million. AMI owed about $203 million more than its assets were worth.
Adding to the troubles for Pecker and his New York-based publishing company is the wrath of Bezos. The billionaire wrote in a blog post last week that he was blackmailed by the tabloid, which allegedly threatened to publish sexually suggestive photos from an extramarital affair. The exchange followed a 12-page spread in the Enquirer last month full of racy text messages that he reportedly sent to his paramour.
Bezos, the world’s richest person, has the resources to fight. On Monday alone, his wealth increased by a bigger dollar figure than all of AMI’s revenue for the first half of this fiscal year.
AMI’s loss through September includes $70 million of noncash charges, which shows the business was profitable on an operating basis, Chief Financial Officer Chris Polimeni said in an emailed statement. In its most recent financial guidance, published in September, the company said it expected revenue and earnings to grow following a series of acquisitions.
The National Enquirer’s battle with Bezos is just the latest saga in a turbulent few years for AMI, which has been on a borrowing binge that swelled its debt load to more than $1.3 billion. Much of that is owed by its parent company, Worldwide Media Services Group Inc., Polimeni said in a statement.
Pecker struck an immunity deal with federal prosecutors as part of an investigation into Trump’s former personal lawyer, Michael Cohen. The company entered into a related Sept. 20 non-prosecution agreement covering crimes including perjury and obstruction of justice, a deal that officials are currently reviewing for potential violations.
The deals stemmed from the company’s efforts to aid Trump by purchasing the rights to potentially damaging stories and declining to publish them, a practice known as “catch and kill.”
Pecker and Trump have known each other for years. In 2013, Trump wrote on Twitter that Pecker would be a “brilliant choice” as the next chief executive officer of Time magazine. A few years later, during the 2016 presidential campaign, Pecker’s National Enquirer suppressed stories by women alleging affairs with the married Trump.
New Jersey-based Chatham Asset Management, a $4 billion investment firm, is the main money behind AMI. The firm threw a financial lifeline to Pecker’s company in 2014 and ended up with about an 80 percent stake. Chatham also is one of the company’s major creditors.
In recent years, AMI has courted Saudi Arabia to help buttress its finances. It also published a nearly 100-page, ad-free glossy magazine heralding the U.S. visit by Saudi Crown Prince Mohammed bin Salman. The move prompted the company to ask the Justice Department whether it needed to register as a foreign agent, the Wall Street Journal reported.
“There are several new investors that came into the fold,” Polimeni said, “and there is no direct investment in the company’s debt or equity by the Saudis.”
The media company’s losses in recent years helped fuel its growing pile of debt. So did more than $181 million spent on acquiring publications, such as Us Weekly. But while losses have narrowed -- the company reported a $45.1 million deficit in last year’s first half -- the improvement is attributable to a one-time $19 million gain from the sale of a magazine in 2015 that the company recorded in the quarter ended Sept. 30.
At the end of last year, the company’s parent, Worldwide Media Services, issued an additional $300.6 million in zero-yielding debt, which results when debtors promise to repay their creditors substantially more than they borrowed, bringing the total to $869 million.
AMI borrowed an additional $460 million from lenders and bondholders through the start of January, about half of which is costing the company 10.5 percent in interest. Much of the borrowing refinanced existing debt.
There have been improvements. During the first half of its current fiscal year, its operating income, which excludes items such as its borrowing costs, jumped from last year’s $5,000 loss to a $611,000 gain.
AMI’s buying spree also established it as the nation’s leading purveyor of celebrity magazines. Its journalism has drawn White House praise as well: Trump said last month that the National Enquirer produced “far more accurate” news stories than the Bezos-owned Washington Post.
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