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Denver Post Hedge Fund Owner Cutting Jobs to Keep 20 Percent Profit Margin?

Denver Post Hedge Fund Owner Cutting Jobs to Keep 20 Percent Profit Margin?
Illustration by Patrick Faricy

Yesterday, following a layoff announcement affecting thirty newsroom employees at the Denver Post , the Denver Newspaper Guild, a union that represents 25 of those marked for pink slips, sent a message to Alden Global Capital, the hedge fund that owns the paper: "Sell The Denver Post Now!" According to DNG administrative officer Tony Mulligan, this salvo was written in part because of the theory that the cuts were made simply to maintain a 20 percent profit margin sans consideration of what the damage might do to the paper's long-term prospects.

There was nothing the guild could have done to prevent the slashing by Alden, Mulligan stresses. "The contract allows the employer to reduce the force for economic reasons — the language is that ambiguous. But I don't believe this was done for economic reasons under my definition."

Mulligan cites a March 10 Newsonomics article by media writer Ken Doctor headlined "Did Digital First Media Owner Alden Cook The Books?" (Digital First Media, which holds the Post's deed, is controlled by Alden Global Capital.) The piece concerns a lawsuit filed in Delaware against the hedge fund by minority shareholder Solus Alternative Asset Management LP. Along the way, Doctor suggests that Post publisher Mac Tully resigned in January because he didn't want to be part of more layoffs and says the suit may shed light on the "20 percent-plus margin profits that Alden continues to methodically wring out of distressed newspapers."

"We don't know what the Post's profits are," Mulligan acknowledges. "But it rings true that Alden has a number in mind for profit at each property. They cut to that profit, and the majority of that is labor costs. I think they do it with a target for this year without regard to next year or the future — which is why they're a vulture hedge fund. They likely have an exit strategy already written up, probably including a bankruptcy where they'll stiff the employees, the creditors and the community."

Mac Tully took over the leadership of the Denver Post in 2013 and resigned as publisher earlier this year.
Mac Tully took over the leadership of the Denver Post in 2013 and resigned as publisher earlier this year.
YouTube file photo

Digital First Media declared that the Post was officially for sale in September 2014, several days after the guild issued an open letter asking for a local benefactor to step up and buy the paper rather than allowing it to slowly deteriorate under Alden's auspices. The latest jeremiad strikes a similar theme, and Mulligan confirms that the union's position has been consistent.

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"All along, we've said, 'Invest or sell,'" he points out, "because a hedge fund is just the wrong owner for a community newspaper. It harms the paper's viability and therefore it harms the community. The way I see it, we have a two-prong problem. We have an irresponsible owner that doesn't want to leave, and we don't have a known buyer waiting in the wings to buy the place. So we're looking for a broad solution. We want to motivate this vulture hedge fund to leave town before it's too late and to find a civic-minded rich person to buy the paper."

This wish isn't beyond the realm of possibility, Mulligan emphasizes. "In other cities — Minneapolis, Salt Lake City, Boston, Washington, D.C. — they've had a civic-minded individual or group step up and buy the papers. These buyers expect to run the business in the black and position the paper to be profitable going forward, and the key to that is maintaining the core of the business, the news content, by retaining the news staff — which is the opposite strategy of the hedge fund."

Over the years, efforts by the Denver Newspaper Guild to find such a benefactor for the Post "haven't been very successful," Mulligan concedes. "We don't have direct access to the local billionaires. That's why I think community pressure and the involvement of civic leaders can be instrumental. These leaders have access to these groups, to the wealthy, and with their help, we may be able to compel Alden to leave soon and find the right local rich person intent on stabilizing and growing the business."

Until then, the downsizing is likely to continue at the Post even as the profits keep flowing in to Alden Global Capital.

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