Report Says Forbes Media Underwent Emergency Restructuring
Fortune article says Forbes violated covenant.
The list of aggressive private equity investments in publishers that flamed out during the recession is a long one and that list also nearly included Forbes Media, according to an article in the August 15 issue of Fortune.
Forbes Media went into default on approximately $90 million of revolving credit according to the article, prompting private equity firm Elevation Partners–which bought 45 percent of Forbes in 2006 for $237.2 million-to implement an emergency restructuring plan and bring in corporate troubleshooter Alvarez & Marsal.
J.P. Morgan and six other lenders agreed to amend the loan in 2010, lowering monthly payments as well as the financial targets Forbes needed to meet to remain in compliance, according to Fortune. However, the amendment also called for the release of Alvarez & Marsal and one of three things: the sale of online dictionary Investopedia; the replacement of Steve Forbes as CEO; or the achievement of specific financial targets. Forbes stepped down in November, replaced by former Softbank Capital exec Mike Perlis.
While Forbes showed improved financials in 2010 with a $22 million gain in profitability thanks to a revenue increase of $9 million and cost cutting of $13 million, the Fortune article claims that, "Five years later Forbes Media’s earning power has declined precipitously, and Elevation is nowhere near the return on investment it had predicted."
Forbes did not return a request for comment at presstime and Fortune says the only response it received was a comment from a spokesperson who said, "Steve Forbes remains editor-in-chief and chairman of Forbes Media. Tim Forbes is chairman of Forbes Digital. The Forbes family remains the controlling shareholder of Forbes Media."
The full Fortune article is available here.