When David Black acquired the Akron Beacon Journal for $165 million in 2006, it seemed like a big win for the Canadian newspaper mogul who several years before had bought the Honolulu Star-Bulletin – and who would buy The Honolulu Advertiser and merge the two Honolulu papers in 2010.
Black was coming off failed bids for two Philadelphia newspapers at the time of the Akron deal and told long-time media columnist Jim Romenesko, “I wasn’t going to lose a third time.”
Two decades later, the Akron deal looks like anything but a win.
Black’s media empire is in financial shambles, insolvent and for sale, with a publisher who lives in Natchez, Mississippi, making the first, “stalking horse,” bid. Black announced his retirement from the company this week as well.
As described in documents filed under Canada’s equivalent of U.S. Chapter 11 bankruptcy restructuring, the Akron deal played a big role in Black’s financial troubles.
The result for Hawaii is a likely new owner for the Honolulu Star-Advertiser, the state’s largest newspaper, as well as The Garden Island on Kauai, The Hawaii Tribune Herald, West Hawaii Today and Midweek.
In a news release, Black Press Ltd. said it had entered into a proposed sale to Black’s debt holders and Carpenter Media Group, which owns more than two dozen small town newspapers in the South, including publications like the L’Observateur of LaPlace, Louisiana, and the Batesville, Mississippi, Panolian.
Carpenter has proposed to put up $7 million in cash and note holders $7 million in debt to buy Black’s entire empire, which also includes three newspapers in Alaska and 35 newspapers and websites in Washington, according to documents filed in the Canadian court proceeding. Black also has secured up to $5.5 million in debtor-in-possession financing from Canso Investment Counsel Ltd. to fund operations while the restructuring is worked out.
Black’s Demise Tracked Fall Of Print Newspapers
Black Press Ltd. lays out a familiar narrative in its petition to the court. For years, Black’s newspapers — like many others in the U.S. — generated consistent revenue and profits, the documents says.
“In the past decade, however, the newspaper and publishing industry has been negatively affected by digital transformation and consolidation pressures,” Black Press wrote.
The company’s print newspapers were losing readers “on account of the shift in the way readers obtain their news,” Black told the court.
The company’s revenues were further battered by “the dramatic decline in advertising revenue caused by the loss of small retailers in the communities the Company’s newspapers serve.”
The Covid-19 pandemic accelerated the problems.
The company highlighted the $165 million Akron Beacon Journal purchase as a particular source of pain.
“Beacon lost money every year following the acquisition,” the document says.
To cut its losses, Black sold the paper for $16 million in 2018. But that wasn’t the end of the bleeding. Black Press remained saddled with some $45 million in pension plan liabilities for its Akron workers.
The company took steps to fix its financial problems. Since 2016, it sold real estate holdings worth more than $45 million and cut $30 million in annual costs throughout the chain. For instance, in Hawaii in March 2019, the company, through its subsidiary Oahu Publications Inc., entered into a sales and leaseback transaction on its Kapolei printing press facility for $38.9 million, resulting in an $8 million gain on sale, according to the court filing.
But none of this was enough to enable Black to pay its bills, court documents say.
In Hawaii, those expenses included a weekly payroll of $405,000 — about $21 million a year — for 272 employees.
According to the court filing, Black’s Hawaii subsidiary also was spending $286,322 per month to lease back the print facility that it sold and $141,964 for space for its offices at Waterfront Plaza. In addition, the company was paying for two condos in Honolulu: a studio at the Island Colony in Waikiki for $1,600 per month and a two-bedroom, two-bath condo at the luxe Hokua high-rise in Kakaako for $5,800 per month. The condos are listed in the court filing as “office for publication.”
Eventually, to avoid restructuring, Black hired a firm that specializes in newspaper deals, but that “did not result in a viable bid for any portion of the Company or its assets,” Black said.
Union Leaders: Star-Advertiser Newsroom Morale Is Low
It’s not clear where this leaves Black’s Hawaii publications and its employees.
Carpenter Media’s chairman, Todd Carpenter, is a capable publisher with a good track record, said Ken Stickney, a long-time editor in Alabama, Mississippi and Louisiana.
“If he buys it, he thinks he’s got a way to make it work,” said Stickney, who worked for Carpenter as editor of The Port Arthur News in Texas from 2017 to 2019.
Carpenter did not respond to requests for comment.
Current employees aren’t convinced. In a press release issued on Monday, the Star-Advertiser union noted that news of the pending sale, which has been widely rumored for months, came just days after the newspaper announced it was laying off four newsroom employees, including longtime photographer Cindy Ellen Russell.
“These losses and the continued lack of transparency have deeply hurt newsroom morale,” the release said.
In an interview, Kevin Knodell, a staff writer who serves as the paper’s union unit chair, said the staff has been especially frustrated the paper’s publisher, Dennis Francis, has refused to communicate with them except through news releases and letters.
“We’ve never heard directly from Dennis,” he said.
In a letter to Francis signed by more than 40 editorial staffers from the company’s various papers, employees expressed their concern that experienced local journalists would be sidelined and their apprehension over a new owner.
“We deserve to know who these buyers are and what their intentions are for the largest media
organization in Hawaii,” they wrote. “The Honolulu Star-Advertiser is the paper of record for Hawaii, and OPI’s other papers more broadly make up the majority of the newspaper industry for all of the islands. Whoever takes on the company takes on that kuleana. And there has perhaps never been a more critical time to ensure that we maintain well staffed, well resourced newsrooms to serve our communities.”
