Brian Tierney was pretty cocky when he and a group of investors bought the Philadelphia Inquirer and its sister, the tabloid Daily News, for $515 million two years ago. The former public relations magnate vowed to boost circulation and revenue at the papers.
How would he do that when Knight Ridder, their former owner, had failed to do so before reluctantly selling itself to McClatchy Newspapers (MNI)?
Tierney boasted that he and his partners could invest more money into the Inquirer and the Daily News because, unlike Knight Ridder, they weren't facing angry public shareholders obsessed with the next quarter.
Sounds straightforward enough. Focus on the long-term and reap the rewards of your fortitude. But that doesn't mean Tierney and his partners aren't under considerable pressure in the short run.
They borrowed at least $345 million to finance their acquisition. Last week, a Standard & Poor's newsletter reported that Philadelphia Media Holdings was in violation of its covenants on its senior debt and missed a June 1 interest payment on a mezzanine loan.
Jay Devine, spokesman for the company, declined to comment on the specifics of the credit challenges. "This is not a sign of any big problems at the company," he insists. But given the financial pressures, Tierney and Co. can only be doing so much investing in the Inquirer these days.
A similar story is playing out at newly-private newspapers across the country.
Knight Ridder blamed Wall Street when it cut. Tierney can always scapegoat his lenders. Either way, the results look depressingly familiar.
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