PECKING ORDER

[Remember this guy? He had his public company, AMI, buy up all the Weider Magazines a few years ago. It was right around the time that Arnold was running for Governor. Makes the Weiders look like extremely intelligent business men, selling their magazines to Pecker for hundreds of millions of dollars as the print magazine undustry continues to suffer under the assault of the internet.  If you want to read a conspiracy theory involving Arnold, the Weiders, and Mr. Pecker, click here:  ergogenics.org.]

David Pecker and Ben Weider After They Partnered

NEW AMI BOARD MEMBERS RIDE HERD ON PECKER American Media's board huddles in New York today and there is a new team of sheriffs in town - the bondholders. The tabloid publisher - home to the National Enquirer, Star and Celebrity Living, among others - has added two board members from its key equity investors: Richard Bressler, a former Time Warner CFO, now with Thomas H. Lee Partners, and Saul Goodman, of Evercore Partners.

They will be asking some tough questions when AMI's board meets for the first time since Pecker and his principal backers, Lee and Evercore, hammered out an agreement that gives the bondholders tighter financial controls over the publisher. Insiders said the pressure has been tough on Pecker, the swashbuckling CEO who always seemed able to pull financial rabbits out of his hat. "This has to be weighing heavily on his shoulders," said one. Pecker has reportedly even shaved off the trademark mustache he sported throughout his publishing career. He has also been spotted flying first-class commercial instead of charter, as he shuttles between AMI's Boca Raton headquarters and its New York City offices.

"They have created a structure that says run this business for cash [flow] or bad things are going to happen," said Ken Meehan, an assistant editor with Debtwire, which follows stressed companies. The deal gives the company little margin for fiscal error.

The tighter fiscal polices have already hit operations. Sly, a magazine published in conjunction with Sylvester Stallone, has folded. Celebrity Living, a new $1.99 weekly which the company tossed into the low-priced genre to offset the charge by Bauer Publications, has struggled, and last week the company conceded it is relinquishing extra pockets at supermarket checkout counters that it had intended to buy. The company said the magazine's sales were soft, but that it was meeting its rate base of 225,000 copies. A new contract with the high-octane Editorial Director Bonnie Fuller, which expires in July, still has not been signed, but talks are continuing. Fuller has been coasting on a wave of fluffy stories about her new book, "The Joys of Much Too Much: Go for the Big Life, the Great Career, the Perfect Guy and Everything Else You've Ever Wanted," from Simon & Schuster's Fireside imprint.

But her editing has been less happy. Star magazine has run an embarrassing string of celebrity pregnancy stories on Britney Spears, Demi Moore, Jessica Simpson and Jennifer Lopez - all of which later turned out to be false. Under a deal reached March 17, AMI had to pay bondholders $5.5 million within five days, according to a filing with the Securities and Exchange Commission. AMI has $550 million in bonds outstanding, and a total debt load of $1 billion. AMI will also have to meet tighter cash flow debt ratios, and begin lowering its cash flow to debt ratio over the next two years. If it fails to do so, it will incur penalties over $15 million. Evercore and Lee could also be forced to inject $40 million into AMI, or the firm could be forced to issue new bonds that will give the bondholders even more clout. In exchange, the bondholders waived the default that the company entered into last month. The bondholders include giants as Capital Research & Management, Eaton Vance Management, PIMCO, Post Capital Management, and Alliance Capital Management. Link