Will this turn out to be a case of lenders’ remorse?
Back in January, before Amazon CEO Jeff Bezos went public with allegations of extortion and blackmail against the National Enquirer, the tabloid’s parent company raised $460 million to refinance its debt. American Media Inc. didn’t disclose who loaned it the money, but the New York Post said new investors kicked in along with hedge fund managers Leon Cooperman and Chatham Asset Management, which already own a chunk of the company.
You have to wonder whether the new investors are worried about getting paid back now that federal prosecutors are looking into whether AMI violated a non-prosecution agreement the company reached concerning its payment of $150,000 to former Playboy model Karen McDougal to keep quiet about her affair with President Trump, a violation of campaign finance rules. If the feds decide that AMI broke the law in its dealing with Bezos, it could be prosecuted in the McDougal case. Let’s just say that would not be good for business.
In case you’ve been completely off the grid, Bezos wrote in a blog post last week that the tabloid threatened to publish salacious photos of him if he didn’t drop an investigation into how the paper got texts for a story in January about his extramarital affair with former television anchor Lauren Sanchez. AMI also demanded that Bezos declare publicly that the Enquirer’s coverage wasn’t politically motivated; AMI’s chief executive, David Pecker, is a pal of President Trump, who has a long-running beef with The Washington Post, which is owned by Bezos.
A lawyer for AMI went on national television yesterday to reject Bezos’ accusations. His client, he said, was engaged in legitimate journalism.
“It absolutely is not extortion and not blackmail,” attorney Elkan Abramowitz said on ABC’s “This Week” on Sunday.
In Abramowitz’s telling, “Bezos didn’t want another story written about him or those pictures published, AMI did not want to have the libel against them that this was inspired by the White House, inspired by Saudi Arabia or inspired by The Washington Post.” Hence, he said, the two were negotiating “to try to resolve their differences.”
As for the new debt raised by AMI, $235 million was a first-lien loan that matures in 2023, and $225 million came in the form of second-lien bonds paying a 10.5 percent interest rate and due in 2026. The company will use the money to pay off a loan it took to buy celebrity and teen magazines from Bauer Publications, and to refinance its other debt.
“Completing this latest refinancing, in one of the most challenging market conditions in recent history, underscores the confidence the investment community has in American Media and our powerful brands,” Pecker said in a statement last month.
We’ll see how much confidence investors have now that the world’s richest person and the feds are going after it.