PECKER PROSPECTS ARE PETERING OUT
By KEITH J. KELLY
June 15, 2006 -- By putting the muscle magazines on the block, embattled American Media CEO David Pecker gained some breathing room, but several industry insiders think his time atop the tabloid empire may be nearing an end.
In the wake of American Media's announcement yesterday that five titles - including Muscle & Fitness, Flex, Muscle & Fitness Hers, Country Weekly and Spanish-laguage title Mira - the far-flung publishing giant he was trying to assemble now looks like it will proceed with downsized aspirations.
"It looks like a major-league collapse of the Pecker empire," said one industry executive.
At the very least, the dream of a major expansion and eventually going public with an IPO appear to be over for the foreseeable future.
In fact, sources tell The Post, in recent months some board members from the Thomas H. Lee investment team have been so worried by the deteriorating financial picture at AMI that they had quietly been sounding out publishing executives to replace Pecker as CEO.
The board stopped short of a seeking an ouster, and now appears to be giving Pecker a final chance to right the listing ship.
It faces a crucial restatement of its earnings on June 28 covering an 18-month period that includes all of 2005 and the first two quarters of the current fiscal year.
Ousting Pecker would be costly. His contract extends to April 2008 and he is the largest individual stockholder, with 4.9 percent of the Class A voting stock and 52,726 shares of the nonvoting B stock.
If he is axed without cause, AMI must pay Pecker a $4.8 million one-time bonus plus $3 million for the last two years of his salary, according to SEC filings.
"David Pecker is leading AMI as its CEO. There is no change in his status," said a spokesman for Thomas H. Lee of the prospects for a CEO search.
Still the company faces a host of financial problems, and the shuttering of Celebrity Living and two other titles this spring were not enough to solve the company's woes.
Newsstand sales of the glossy Star, one of the vehicles tagged to power growth, have been slumping, at fewer than 700,000 copies a week.
A year ago it was selling more than 850,000 on newsstands.
Lost in all the commotion is the still unsigned contract of Editorial Director Bonnie Fuller, once hailed as a newsstand genius. Her three-year deal expires June 30.
The five magazines on the block, which are being peddled by J.P. Morgan and Bear Stearns, had revenue of $84 million and total operating profit of around $30 million in 2005.
The company hopes to fetch $300 million or 10 to 13 times earnings. That may be difficult.
"Other than the private-equity guys, I don't see a lot of conventional publishers doing it," said Mark Edmiston at investment bank AdMedia Partners.
The planned sale pleased holders of $550 million in junk bonds. Yesterday, the 101/2 percent bonds were trading at $93, up from $91, while the 8¨ percent bonds traded at $87.50, up from $85.
"Bondholders are pleased he is addressing the debt issue," said Ken Meehan, of Debtwire, which tracks highly leveraged companies.
"It seems pretty consistent that the proceeds will be used to de-leverage the company and improve its credit profile," said Meehan. He did not expect the funds to be reinvested in new projects.
keith.kelly@nypost.com
