It hasn’t been the best week for the folks who manage JPMorgan Chase. And when you’re out $3 billion (or more), it’s tempting to see if you can get somebody else to share a bit of the pain.
Over at Readers Digest, a company that JPM Chase inherited when its private-equity owners floundered, CEO Robert Guth has proposed that its senior debtholders take a $3.2 million “haircut” on $63.9 million in outstanding obligations. You know things are tough when you want to renegotiate a loan to save five percent.
Truth is, things are tough at Readers Digest. The company lost $56.8 million in the first quarter alone, continuing a series of financial setbacks. Being owned by bankers hasn’t helped, something I touched on in 2009:
“Media investment banker Reed Phillips predicts a focus on cost containment, not investment or growth. That’s probably not good news for any of the companies JPM Chase now controls. Ours is a market that demands innovation to sustain and hopefully expand revenues. Structuring Readers Digest to maximize near-term cash flow will likely diminish its overall value for its stakeholders, including JPM Chase.”
I’m not sure that anything would have saved Readers Digest, but paring down the company through a string of sales over the last three years certainly hasn’t done the trick. For established media companies, it’s hard to imagine that conservative strategies carry the day for most of them, either.