Categories: OLD Media Moves

Financial strain at Forbes

Katie Benner of Fortune writes that competing business magazine Forbes had recently violated covenants of a loan and parts of the debt are being sold at less than face value.

The company went through a restructuring with the help of a firm that works with distressed businesses to get back into the good graces of its lenders.

Benner writes, “In 2009 the company had an operating loss of $19.7 million. By 2010 the company showed operating income of $2.7 million. That $22 million improvement in profitability was driven by a revenue gain of around $9 million and about $13 million in cost cuts.

“Forbes Media says its renewed profitability means that it is out of the woods, thanks to the business plan it worked out with Alvarez & Marsal in 2010. And it says the company is confident that it will be able to refinance its revolving line of credit when it comes due on July 6, 2012. Forbes Media said in a statement: ‘It is not up to the banks whether to refinance. It is up to Forbes. [We] have numerous financing options as we go forward.’

“That is technically true, but what should not be forgotten is that the deal with Elevation that set this chain of events in motion has been a failure. It burdened Forbes Media with debt that it ultimately struggled to pay, so much so that the company had to be gutted. Five years later Forbes Media’s earnings power has declined precipitously, and Elevation is nowhere near the return on investment it had predicted. The Forbes family was able to take a lot of money off the table. That’s timely because it is running out of trophies to sell. Last year the Forbes family motor yacht, The Highlander, was put into dry dock, its crew laid off.”

Read more here.

Chris Roush

Chris Roush was the dean of the School of Communications at Quinnipiac University in Hamden, Connecticut. He was previously Walter E. Hussman Sr. Distinguished Professor in business journalism at UNC-Chapel Hill. He is a former business journalist for Bloomberg News, Businessweek, The Atlanta Journal-Constitution, The Tampa Tribune and the Sarasota Herald-Tribune. He is the author of the leading business reporting textbook "Show me the Money: Writing Business and Economics Stories for Mass Communication" and "Thinking Things Over," a biography of former Wall Street Journal editor Vermont Royster.

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