Or, why is a secretive club of millionaires buying up America’s newspapers?

First in an ongoing series on Alden Global Capital and Digital First Media

It’s not easy to find information about Alden Global Capital, the firm that owns most of Digital First Media.

Even Alden’s company website oozes an aura of secrecy. The site is accessible only to Alden’s private investors, the homepage displaying a client log-in form, a New York phone number, an email address — and nothing else, though there’s a lovely background photo of an evergreen forest.

AldenSite
Alden’s Home Page

Because Alden is privately held, it rarely has to report to the Securities and Exchange Commission, and details are scarce. No investors are named, no specifics are offered as to what they’re investing in.

But there are more layers to the shroud. Alden’s activities are especially hard to track because many of its funds have offshore headquarters and have changed or added names — and locations — multiple times since their parent company was founded in 2007.

There’s the now-defunct Alden Global Capital Limited, and the currently operating Alden Global Capital LLC. There’s Alden Global Opportunities Fund (Cayman) LP, and Alden Global Hellenic Opportunities Fund LP. The list goes on.

In all, 24 Alden-related entities currently have filings with the SEC.

Though it’s often described by Bloomberg and others as New York-based, it’s clear from the filings that many of Alden’s offshoots are (or were) headquartered in places with reputations as international tax havens — specifically the Cayman Islands and the English Channel island of Jersey.

Last week, however, Alden briefly surfaced in the public arena when it reported for the first time on its investments in Greece.

Invest in distress

Though Alden is known for investing in distressed newspaper companies, it also invests in distressed countries. In 2014, the company launched its Alden Global Hellenic Opportunities Fund to take advantage of the economic collapse in Greece, and last week the Hellenic fund reported to the SEC that it had raised $12.9 million from 17 investors.

This business of investing in nations or companies when they’re down and out is known in the financial world as a “vulture fund.”

In its 2015 brochure for prospective investors, Alden’s stated strategies are to invest in “event-driven opportunities,” undervalued companies, and “investing in opportunities in Greece and benefiting from the recovery of the Greek economy.”

When describing its financially distressed assets, the brochure says, “These obligations are likely to be particularly risky investments, although they also may offer the potential for correspondingly high returns.”

As to Alden’s net worth, filings show that as of March 2015, the primary company Alden Global Capital LLC managed $2,243,686,000 in assets from 16 clients. That’s more than $2.2 billion for anyone not interested in counting those commas and zeroes.

The minimum investment to get in on this action? That’s $100,000 to $2 million, Alden’s brochure states.

There are also special arrangements for those who think such amounts are chump change: “Separately managed account relationships are subject to significantly higher investment minimums that are negotiated on a case-by-case basis.”

Buying the news

So how did this billionaires’ vulture fund come to own many of America’s newspapers?

Soon after its inception, Alden began investing in distressed newspaper companies, including Gannett, McClatchy, Freedom, Tribune, PostMedia, Philadelphia Media, and Media General, according to Harvard’s Nieman Lab.

When the Journal Register company emerged from bankruptcy in 2009, Alden bought shares. In 2011, it bought the company outright.

Meanwhile, MediaNews’ parent company was coming out of bankruptcy in 2010. Alden acquired a large stake and several of its executives sat on the MediaNews board.

Then, in September 2013, news releases announced that Journal Register and MediaNews were uniting to form Digital First Media, or DFM. There was no mention of the real mover behind this historic “merger without merging,” as the Nieman Lab’s Josh Benton calls it.

That mover was, of course, Alden Global Capital.

DFM became the second-largest newspaper company in the U.S. in terms of circulation. Once the promises of a bright digital future for newspapers died down, many of those papers’ considerable real estate and other assets were sold off. As layoffs and severe cost-cutting escalated (though, as media analyst Ken Doctor has noted, profits remained high), Alden began negotiating to sell all of DFM to the highest bidder in 2014.

In 2015, another private investment firm, Apollo Global Management, was announced as the buyer. The deal abruptly went bust as buyer and seller apparently couldn’t agree on a price.

Today, Alden still owns DFM with no clear plan in sight.

To say Alden has invested in news media may be a misleading term. To many of us, investing implies an injection of capital, perhaps with the connotation of nurturing a fledgling business into profitability. In contrast, the Alden-DFM method has been described as a “chop shop” strategy of dismantling newspapers’ physical operations, stripping off assets and profits, then hoping to sell whatever’s left.

Meanwhile, every day Americans are still waking up and expecting to read the news, whether it’s printed on paper or on their local newspaper’s website. Whether they read it on smart phone or a tablet, people still expect to find out what’s happening in their communities and what elected officials, nonprofit groups and businesses are up to.

That fact appears to be unimportant to Alden and its investors — indeed, the word “news” appears nowhere in Alden’s investment brochure.

There’s more to this story, much more, which we’ll be investigating and bringing to you in future posts.

Coming next in this series, Hedge Funds and Newspapers — A Simple Primer.