“We’re becoming like North Korea,” is something you often hear on talk radio in the United States.

The conservatives who dominate the AM airwaves are, of course, referring to the Democratic administration of President Obama.

To me, however, these fire-breathing conservatives echo the incendiary rhetoric issued daily by the Korean Central News Agency of DPRK, the official state news agency of the communist dictatorship:

• North Korea: “The present approach of the Japanese government towards the past crimes is very prejudiced, narrow-minded and wicked.”
• Rush Limbaugh: “This is a diabolical intricately woven web of deceit that is being executed and woven here, and you have been sucked right into it.”
• North Korea: “The plan is a despicable product of the anti-DPRK policy pursued by the above-said forces that are running amuck (sic) with bloodshot eyes to find a pretext for a war of aggression on the DPRK and an extension of their strategy for a war against it.”
• Rush Limbaugh: “The American people are being awakened, and they’re being awakened because they are finally seeing the real Barack Obama, and it’s nothing like the man they thought they elected. This is an utter, cold, mean-spirited partisan liar.”
• North Korea: “The imperialists are driven into an uncontrollable crisis at present and the fact that the popular masses are getting awakened in a revolutionary manner is a clear proof that the doom of imperialism is coming nearer.”
• Rush Limbaugh: “Whether Obama is diabolical, deceitful or just plainly incompetent doesn’t matter. The end result is the same: rotten.”
• North Korea: “The U.S., in particular, is whipping together pro-American conservative forces forsaken by history in a desperate bid to help them wrest ‘power’ through the forthcoming ‘presidential election’ at any cost and thus tide over the crisis of its colonial rule and revive the rotten politics.”

A lot’s been said about last week’s buyout of The San Diego Union-Tribune by Platinum Equity, a private equity firm, which disclosed only the barest details about the sale.

The sale isn’t about newspapers. Rather, it’s about land.

Platinum Equity is not in the newspaper business; it’s in the distressed assets business. From an accounting perspective, land is the only asset that never loses value. The Union-Tribune owns 13 prime acres in Mission Valley that’s sandwiched between the Town & Country Resort and the ritzy Fashion Valley Mall. The company also has half an acre in La Jolla.

If reports that the newspaper company sold for less than $50 million are correct, Platinum Equity is getting the company land at a tremendous discount in a depressed market. All it has to do is hang on for a few years until the market recovers and then it has prime property for an apartment tower, corporate offices, hotel or mall expansion.

What to do with the newspaper then?  Few people paid much attention to the last sentence in the press release announcing the sale:

Platinum Equity was advised by Hughes Hubbard & Reed and Alvarez & Marsal’s Transaction Advisory Group.

Alvarez & Marsal is overseeing the dismantling of Lehman Brothers. The bankrupt Tribune Company also hired Alvarez & Marsal to craft a restructuring plan.

Last year, Fortune magazine described Alvarez & Marsal as a firm that profits from corporate misery:

Alvarez & Marsal do the mopping up when a company has run out of options and can’t meet its loan obligations. With some clients, A&M dispatches teams to work much like consultants – looking over the books and talking ideas – but about a hundred times faster. In thornier cases the firm does the dirty work itself, usually with Tony Alvarez, Bryan Marsal, or another partner stepping in as CRO – chief restructuring officer – and doing triage like ordering layoffs, selling off assets, and making overhead cuts.

It seems then that Platinum Equity is going to make the kind of moves that the Union-Tribune’s family owners never could. Sadly, that is going to mean the end of San Diego’s biggest newspaper.

From the WSJ:

Former federal officials have dubbed Citigroup the “Death Star,” comparing the bank’s threat to the financial system with the planet-destroying super weapon in the “Star Wars” movies. Privately, in the words of one official, they regard the banking giant as “unmanageable.”

Lee Enterprises, the nation’s fourth biggest newspaper chain, has been granted a last-minute stay of execution. The new execution date is April 28, 2012, when Lee will owe principal payments of $721m, plus interest.

To put this number into context for you, if Lee sold off all its printing plants, buildings and equipment, and liquidated all its inventory to satisfy its creditors, it would still be $400m short. Stil, Lee thinks it can somehow gut it out. Its sees its enormous problems as temporary, so the party continues!

Lee’s most pressing concern was a $306m balloon payment due to institutional investors in April.  The newspaper company was hit hard by the fall in ad revenues and so bloated with debt that it didn’t have enough cash to pay.  But rather than force Lee into bankruptcy, the lenders have given Lee a three-year reprieve:

Lee today repaid $120 million of the principal amount of its $306 million Pulitzer Notes debt due in April 2009 using a portion of its restricted cash, which totaled $129.8 million at Dec. 28, 2008. The remaining debt balance of $186 million has been refinanced by the existing lenders until April 28, 2012. Under the agreement, $9 million of restricted cash was retained to facilitate the liquidity of the operations of Pulitzer Inc., a wholly owned subsidiary of Lee, and its subsidiaries.

But like a good loan shark, the lenders are going to wring extra dollars out of Lee. Beginning in June, it must pay its lenders $4m every quarter. In October 2010, it will pay a total of $8m cash. Plus the interest rates on the Pulitzer Notes will rise from 8.05 percent to 9.05 percent next year, ultimately increasing to 10.05 percent ($19m) by 2012.

Lee also owes $1.1b amount to the bank, who make concessions to allow the company to survive. Lee owes the bank principal payments totaling $234m over the next three years. Payments at maturity will increase $80m to $535m due April 2012.

Escaping the hangman’s noose wasn’t cheap, by the way. Refinancing this whole mess cost Lee $20m.

Abandon all hope, ye who enter here.

Moody’s today lowered its rating on the debt of The New York Times to junk status.

This means that bonds the Times issues are now considered speculative and the newspaper company will have to pay higher rates of interest to attract investors.

This will increase the pressure on the Times, which is already struggling to cope with a sheer drop in advertising revenues and a large debt load it has to finance.

The real news is the dramatic rise in the newspaper’s unfunded pension liabilty. Moody’s estimates it at a whopping $750m for the end of 2008. (The Times hasn’t released its year-end results yet.)

The Times debt is now six times its annual earnings before it deducts taxes and accounting charges (EBIDTA).

That’s a debt that must be paid. If the Times can’t pay it, then you will. If the Times goes into bankruptcy, which isn’t likely, taxpayers will cover much of the unfunded Times pension liability through the the Pension Benefit Guaranty Corporation.

The latest figures available are from the end of 2007, when the company disclosed a $275m gap between its $1.82b in obligations to its retirees and the $1.55b value of the fund assets set aside to pay ex-Timesmen.

If I’m reading this right, that gap grew by $500 million in fiscal 2008. That  means the pension plan lost as much as 32 percent of its value. Given that the S&P 500 lost 38 percent last year, this seems to make sense.

The newspaper company is in trouble. It recently got a $250m capital infusion from Mexican billionaire Carlos Slim, but the Times must pay more than 14 percent annual interest. The Times is also trying to tap the capital locked up in its brand-new headquarters that could bring in another $225m.

Dark days indeed.

Update: Times CFO James Folio disclosed Jan. 28 that the company’s unfunded pension obligations are $625m, which means the pension fund lost $35om or 23 percent in 2008. That will cost the Times an extra $100m for the next seven years.

It’s ironic that Lee Enterprises, a company that prides itself on the transparency and openness of its journalism, is engaging in a bit of financial trickery to fool investors.

Lee is a sinking ship. Its anchor has snagged on $2 billion in debt while the company is being pounded by a fierce gale.

To keep investors from fleeing in the lifeboats, Lee Enterprises announced today that it’s resorting to the financial equivalent of rearranging the deck chairs: a reverse stock split.

This is an utterly meaningless gesture designed to make it seem that the company’s worthless shares actually have more value. If you’re stupid enough to buy Lee stock after that, you deserve what you get.

Investors weren’t fooled. Shares of Lee fell nearly 14 percent today to close at 31 cents.

A reverse stock split means that instead of 100 shares of Lee worth $31 at today’s closing price, you will have 5, 10, 20, or 50 shares of Lee worth $31. It’s like exchanging 310 dimes for 124 quarters.

Nothing changes. It does nothing to address Lee’s huge problems in either the short-term or the long-term. That’s why the list of companies that went into bankruptcy after a reverse stock split is long.

But Lee is desperate to rejoin the New York Stock Exchange, which doesn’t want to trade piddly-ass penny stocks. If only the company cared as much about journalism as it does about its stock price.

Addendum: The company did receive a temporary reprieve from certain “covenants” on its Pulitzer debt, which means that Lee isn’t in default, yet. However, if I’m reading the company’s release correctly, Lee still owes a $306m balloon payment due in April. (background here).

In End Times, Michael Hirschorn of The Atlantic who gazes into his crystal ball and sees the death of The New York Times.

It’s certainly plausible. Earnings reports released by the New York Times Company in October indicate that drastic measures will have to be taken over the next five months or the paper will default on some $400 million in debt. With more than $1billion in debt already on the books, only $46million in cash reserves as of October, and no clear way to tap into the capital markets (the company’s debt was recently reduced to junk status), the paper’s future doesn’t look good.

Times spokeswoman Catherine Mathis responds with a mighty bitchslap:

Your article “End Times” which speculates on whether The New York Times can survive the death of journalism, leaves a lot to be desired from the standpoint of . . . well, journalism.

Granted Hirschorn is being a bit irresponsible because, as he himself admits, the chances that the Times will go under are very slim, but methinks Mathis doth protesteth too much.

The Times is in trouble: The paper recently announced plans to borrow $225m against its beautiful, brand new steel-and-glass 52-story headquarters to deal with a cash crunch of its own making.

You would think that given what’s going on in the industry, the Times would tighten up operations, but American Thinker points out that in March 2007 the company increased its dividend 31 percent to 23 cents a share to “return more capital to shareholders.”

Twenty-three cents a share may not sound like a lot but it cost the company $132m a year. Of that, $25m went into the accounts of the Ochs-Sulzburger family that controls the paper. The family rode that gravy train until November, when the dividend was slashed to 6 cents.

But the Old Grey Lady isn’t exactly sitting on a pile of cash like, say, Microsoft. While the family was collecting its dividend checks, the Times was trying (and failing) to slash its costs by about $140m a year, almost exactly the amount of the dividend.

The Times couldn’t right the ship, so it has been tapping $400m from its two revolving lines of credit to pay expenses, including the dividend. One of those credit lines is expiring in May and no one’s willing to lend these days. So the Times is now borrowing against its headquarters to pay the bills. (Mathis points out that technically, the Times isn’t borrowing but arranging a sale-leaseback, but I think that’s a distinction without a difference.)

The Times borrowed to pay its investors with money it doesn’t really have. Somebody please explain to me how this is different than a Ponzi scheme.

Corporate debt is a bit like the piece of ricotta torte I had for dessert last night: it goes down very easily, but chronic overindulgence will constrict the arteries, strain the heart, and possibly even kill you. And that’s exactly what is happening to Lee Enterprises, which publishes nearly 50 daily newspapers including the North County Times in San Diego County.

Lee Enterprises swallowed a staggering amount of debt over three years ago when it bought Pulitzer Inc., publisher of more than a dozen daily papers including the St. Louis Post Dispatch, founded in 1879 by Joseph Pulitzer. That turned out to be a disastrous move, as Lee is now in grave condition. Nearly 10,000 employees may find that come April, their employer can no longer survive in its present condition.

I decided to write about Lee after a friend who works for the chain asked what I thought of the company’s finances. Management was sugarcoating things, and my friend had no idea where things stood. (Full disclosure: I worked for the Lee owned Quad-City Times in the 1990s.)

Reading the company’s Dec. 31st 10-K filing led me to the conclusion that Lee Enterprises is already dead. A balloon payment of $306 million dollars is coming due April 28 and Lee, which posted a loss of nearly three times that amount last year, has flat-out admitted that it doesn’t have the cash.

The newspaper company can’t borrow its way out of this because its lenders have put it on a strict debt diet — no more sweets for you, Lee! They can’t borrow, they don’t have the cash, so Lee is left with few options. The company could sell assets to pay down debt but there’s not much of a market these days. Another option is a debt-for-equity swap, with the lenders becoming owners of the company.

Ultimately, it comes down to this: Either institutional investors that hold the secure notes will show mercy, or a bankruptcy judge will have to carve up the company’s bloated corpse and sell off the parts.

Lee’s stock closed at 56 cents today, down from $15 a share a year ago, and many on Wall Street think it hasn’t hit bottom. Lee’s short interest, a measure of pessimism in the company’s future, is one of the highest for any publicly-traded U.S. firm.

The Davenport, Iowa-based company’s difficulties are a symptom of the pain experienced by newspaper chains that used debt to finance growth in recent years. Tribune Corp., publisher of the Los Angeles Times and the Chicago Tribune, is in bankruptcy. McClatchy Corp., which loaded up on debt to buy Knight-Ridder in 2006, is struggling for survival.

When it acquired the St. Louis Post Dispatch in 2005 for $1.5 billion, Lee also assumed a $306 million debt, which is a twisted tale in itself.  Pulitzer borrowed the money in 2000 to gain control of the Post Dispatch and buy out almost all of the stake held by the Newhouse family’s Advance Publications. (Privately-held Advance owns Conde Nast, publisher of The New Yorker, Vanity Fair and others, and also publishes major metro dailies in Portland, Ore., and New Orleans.)

For 16 years, Pulitzer had been paying Newhouse half of the Post Dispatch’s profits under a “joint operating agreement” with a newspaper that no longer existed. Newhouse sold the St. Louis Globe-Democrat in 1984, and somehow got Pulitzer to keep paying it, even after the Globe-Democrat stopped printing a few years later. (Newhouse still gets 5 percent of the Post Dispatch profits.)

The bad news doesn’t end in April because the Putlitzer debt just keeps on dealing out pain. The $306 million is only the principal on the loan, which carries 8.05 percent interest annually. So the total bill is more than $600 million. And counting.

That’s the story of how a bad deal to buy out one newspaper chain is about to destroy two others.

Thomas Medvetz, The San Diego Union-Tribune:

Since the false premises and reckless mismanagement of the Iraq war have become widely known, there has been a great deal of soul-searching about the content of our public debate. But in my view the problem with this soul-searching is that, like the discussion above, it tends to reduce very quickly to a tallying of individual credit and blame rather than an examination of the profound misfirings of institutions. A postgame score card is no substitute for genuine inquiry into the deeper rules of public debate, which at present tend to ensure victory to the holders of the loudest megaphone over the bearers of evidence, to broadcast ratings over journalistic integrity, and to vigorous flag-waving over rigorous analysis.

My piece last week on the “Obsession: Radical Islam’s War with the West” DVD that was handed out in political swing states a month before the election provoked some interest here and here.rent a car bulgariaТюмень ландшафт The Guardian, based in London, quoted me as saying:

“Clarion was thinking of more creative ways to use newspapers than newspapers were,” Seth Hettena, a reporter who investigated the film for the Columbia Journalism Review, said.

Hettena described the free DVDs as “fall[ing] into a grey area, at the very least”. He cited the timing of the newspaper adverts, their distribution to 14 US states where voters are split on the presidential race, and Clarion’s ability to keep its donors secret under the tax laws.

The Altantic Monthly’s Jeffrey Goldberg said that Aish HaTorah, the group behind “Obsession,” is “just about the most fundamentalist movement in Judaism today.”

I actually have another idea for a film: I would call it “Obsession” as well, but it would be about the poor souls who believe that Obama is a radical Muslim, that Israel has a right to expel Arabs from its lands, and that America should declare war on all of Islam.

Who paid to distribute 22 million copies of “Obsession” via newspaper? We still don’t know.

My piece about the documenary “Obsession” is up on CJR. If you haven’t heard about this film, then you probably don’t live in a political swing state. More than 20 million copies of this film were distributed last month by newspaper

Who’s behind this? No one really knows.

With apologies to The Washington Post.

This is Playoff Week. That, in reality, is about all that anyone knows outside Terry Francona’s inner, inner circle — that sometime in the next week the Boston Red Sox General Manager will announce his pitching lineup against the Tampa Bay Devil Rays. Beyond that, the baseball world is in a zone of fevered speculation.

Nothing is certain, and one sign of how jittery everyone is about the timing and the choice came a few hours ago, when the gossipy PROSportsDaily.com posted an item that said, “Paper: Red Sox may announce pitching lineup in AM.” That set off alarms in newsrooms across the country until the team’s front office shot it down — although it was not clear exactly what they were shooting down, other than that the announcement would come early this morning.

There was a widespread assumption, based on nothing solid from the campaign, that Francona could make his announcement this morning, this afternoon, or stage a multi-day rollout. Now, in a twist that goes against recent history, there are signs that Francona may wait to announce his choice until this weekend or just before game one on Monday in hopes of providing a big boost before the series opens.

In addition to giving some playoff-eve energy to the Red Sox, a late-in-the-week rollout would have another benefit in the eyes of his loyalists. It could help overshadow the other dominant story heading into the playoff, which is the long-running drama involving Red Sox pitcher Clay Buchholz and his girlfriend, Erica Ericsen, the 2007 Penthouse Pet of the year.

An announcement late in the week suggests that the Red Sox coaching staff believes that, in an era of 24/7 coverage and increasingly shortened news cycles, sustaining interest in a multi-day rollout has become increasingly difficult. Last year, Francona, the World Series winning manager, choreographed a five-day rollout of his choice of starting pitchers. Media attention spans today are considerably shorter.

Francona could move whenever he’s ready, but if he makes his announcement sooner than Friday, it would mean disrupting a schedule that is already set. He will be in Boston on Tuesday for a meeting with the coaching staff, an important event that he probably won’t want to overshadow with a pitching lineup announcement.

One possibility is Curt Schilling will get the call in game one. Schilling ….

I love songs about horses, railroads, land, judgment day, family, hard times, whiskey, courtshi, marriage, adultery, separation, murder, war, prison, rambling, damnation, home, salvation, death, pride, humor, piety, rebellion, patriotism, larceny, determination, tragedy, rowdiness, heartbreak, and love. And Mother. And God.

Johnny Cash, 1996

The Los Angeles Times today announced plans to cut 250 positions across the company, including 150 positions in editorial, in a new effort to bring expenses into line with declining revenue. In a further cost-cutting step, the paper will reduce the number of pages it publishes each week by 15%.

More here. 

Great story in The Forward about Sasha Baron Cohen’s new project. Dressed in leather and studs, his arms and chest shaven, Cohen spoke in a heavy German accent, with “ultra-gay” movements and mannerisms as he interviewed a Jew and a Palestinian:

“Vait, vait. Vat’s zee connection between a political movement and food. Vy hummus?”

We exchanged astonished glances. “Hamas,” we explained, “is a Palestinian Islamist political movement. Hummus is a food.”

“Ya, but vy hummus? Yesterday I had to throw away my pita bread because it vas dripping hummus. Unt it’s too high in carbohydrates.”

The Hamas-hummus confusion went on for several minutes. Then, the interviewer declared: “Your conflict is not so bad. Jennifer-Angelina is worse.” 

Newsweek finds out Cindy McCain is behind on the property tax bills on her La Jolla, Calif. condo.

 Shortly after NEWSWEEK inquired about the matter, the McCain aide e-mailed a receipt dated Friday, June 27, confirming payment by the trust to San Diego County in the amount of $6,744.42. 

I live in San Diego City Council District 7 and I just got a mailer from the GOP candidate April Boling. Or as she calls herself, “April Boling, CPA.”

I like the quote on the back of the mailer so much that I clipped it out and pinned it on my wall:

 “Some people think I’m a little boring, and maybe I am. After all the fiscal and ethical problems at City Hall, maybe a little boring wouldn’t be so bad.”    

Can you imagine her victory speech? “Did you know that the Aleutian word for thank you is “qagaasakuq.” But enough frivolity. Now, because it is past my bedtime. I must retire.”

But things are in such a state in San Diego, this approach might work in a race for an open council seat.

Boling’s opponent is former TV reporter Marti Emerald. I interviewed Emerald, a Democrat, for a column I wrote a while back.

The mailer from the Boling campaign has this quote about Marti:

 “Where was Marti when City Hall was falling apart? Investigating how to get the best deals at local garage sales or where to get the best cup of joe in San Diego.”    

That, my friends, is media criticism.     

I admit it. I’ve been watching American Idol this season.  I tried to fight it off. Really, I did. No self-respecting 38-year-old man should be watching American Idol, I told myself. For six seasons, I held out.

But the show was too relentless, too determined. It pounded away at my consciousness, demanding to be let in. Finally, I gave in.

American Idol embraced me — and my contempt.  I rooted for a white, dreadlocked reggae fan from Texas when he forgot the lyrics to “Mr. Tambourine Man.” I  counted the number of times Randy Jackson said “Check it out, dog.” I looked for signs of alcoholism in Paula Abdul.

Of course I cheered when Simon Cowell heaped scorn on the hapless contestants, before a live audience of 27 million. It’s the thinking man’s cumshot. 

And the product placement! Oh, the product placement! The Ford commercial sung by the Top 5! The Coca-Cola cups in front of the judges!  The wardrobe placements, the background placements, the call to action placements — I salute you all! 

Some lowly intern at Nielsen Media Research got the job of counting the number of product placements on American Idol. The number of placements in Season 7 is surging, Nielsen says. There have been 3,291 placements so far this year. And we’re only halfway through the year.

In Season 12, the contestants will be singing commercial jingles right into their cell phones, while the backing band does a pan-flute solo with Coca-Cola bottles! We’ll have a contestant named Apple or Cingular! Oh, the possibilities.

Yes, I’m pathetic. But it turns out, I’m just as pathetic as the rest of the American Idol viewing audience. My age group, the 35 to 49 year-olds, accounted for nearly 30 percent of the American Idol audience, according to Nielsen Media Research. See for yourself here. 

The next biggest age group? The 50 to 64-year-olds.

I shouldn’t be surprised by this. The clues were there all along. The reason why the songs this season were by Dolly Parton, the Beatles, Neil Diamond, Roberta Flack, and Bob Dylan is because half the audience is over the age of 35. 

Ah, the Baby Boom generation. What institution haven’t you ruined yet?

I’m putting the Cunningham trial aside for a while. You heard me right, you Cunningham case obsessives, you Duke haters, I’m taking a break. I need to get a life. It’s time to do some incisive D.C. reporting like the LA Times:

A senior Bush administration official, speaking on White House rules of anonymity, said the administration had looked at concrete steps over the last week.

“We had some ideas. The Turks have had some ideas. The Iraqis have had some ideas. The Kurds have had some ideas,” the official said.

(Hat tip, Kevin Drum)