After years of dishing tales of celebrity folly and misfortune, The National Enquirer's publisher has fallen on hard times of its own.
American Media Inc. plans to seek federal bankruptcy protection in the next two weeks or so. The privately held company, based in Boca Raton, Fla., announced its intention Monday without sharing any details about its finances.
Calls to American Media weren't immediately returned.
American Media, whose other publications beside The National Enquirer include Star, Shape, Men's Fitness and Fit Pregnancy, is trying to get most of its creditors to back its reorganization plan before it files for Chapter 11 protection. About 80 percent of American Media's bondholders already have expressed their support, the company said.
By cobbling together a pre-packaged bankruptcy case, American Media hopes to gain court approval of its plan within 60 days of its filing. That would be much quicker than most corporate bankruptcy cases are resolved.
Like other publishers of newspapers and magazines, American Media has been struggling to recover from the worst recession since World War II while also trying to adapt to technology that has driven more readers and advertisers away from print to less expensive or even free alternatives on the Internet.
The challenge has proven to be too daunting for some and has culminated in bankruptcy filings by more than a dozen U.S. publishers of newspapers and magazines since December 2008. Many of the publishers seeking refuge in bankruptcy court were saddled with heavy debt loads that they took on during better times.
American Media appears to fall in this category. One of its subsidiaries, American Media Operations, had $1.1 billion in debt as of December 2008, according to a filing made with the Securities and Exchange Commission in early 2009.
The company reached an agreement with its major bondholders in July to reduce its debt by $200 million. It didn't disclose how much debt it still had at that time.
If its reorganization plan is approved, American Media indicated that much of its debt would be wiped out in exchange for giving its bondholders ownership of that company. The bondholder group includes hedge fund Avenue Capital and distressed debt specialist Angelo, Gordon & Co., which already has gained stakes in major newspapers such as the Star Tribune in Minneapolis and The Orange County Register in southern California through bankruptcy proceedings.
"American Media is engaging in this strategy from a position of financial strength and confidence," David Pecker, the company's CEO, said in a statement. "It will provide us with the ability to compete even more aggressively with our peers in the industry."
Stiffening competition for celebrity gossip and news has hurt American Media's publications. Besides other print magazines such as Time Warner Inc.'s People and US Weekly, National Enquirer increasingly finds itself chasing websites, such as Time Warner's TMZ.com, that dig up the latest news about celebrities.
The increased coverage of celebrities may be one reason that fewer people are buying National Enquirer and other American Media publications. The company's website says its magazines currently have a combined circulation of about 6.8 million. In March 2008, the company's publications were selling a combined 7.5 million, according to an SEC filing.