HM Capital, the more than 20-year-old buyout shop whose storied history comprises one of the more humbling falls from grace in private equity history, is struggling with a pair of newspaper investments and has abandoned media as a target sector, Buyouts reported earlier today.
One result: The firm has parted ways with Peter Brodsky, a partner who helped lead the newspaper deals, among other media investments. In addition, the firm’s latest pool, the $785 million HM 2006 Sector Performance Fund LP, is so far posting lackluster results. As of March 31, the fund was generating an investment multiple of .66x and an internal rate of return of -17.2 percent, according to backer Teachers’ Retirement System of the City of New York. In a statement provided to Buyouts, HM Capital said those numbers don’t reflect the unrealized value of the fund’s investments in the food and energy sectors and blamed the fund’s poor start on the investments in media.
“Media investments in 2007-2008 resulted in this depressed valuation and, as such, the firm will no longer invest in this troubled area,” the firm said in the statement, adding that it “fully expects the Sector Performance Fund to be profitable and the firm looks forward to a successful future exclusively focused on food and consumer products.”
In the wake of an advertising downturn, Richard Connor on Oct. 28 announced he would resign as of year-end as editor and publisher of The Times Leader, a newspaper in Wilkes-Barre, Pa. that is part of The Wilkes-Barre Publishing Co., which owns a group of newspapers HM Capital and Connor partnered to buy in 2006 for $65 million.
Connor is also resigning as CEO of MaineToday Media, a newspaper chain HM Capital formed in 2009 through the acquisition of several assets, including the Portland Press Herald/Maine Sunday Telegram, the Kennebec Journal and the Waterville Sentinel, among others. The Wilkes-Barre Publishing Co. and MaineToday Media are separate investments, although they shared resources.
Additionally, a North Carolina paper company, McGrann Paper Corp. of Charlotte, has sued MaineToday for payment of more than $124,000 for more than 300,000 pounds of specialty paper used in printing advertisements, Bloomberg Businessweek reported Nov. 3. MaineToday is trying to restructure its debt, that report said.
Connor’s announcement followed recent layoffs at both companies. Brodsky, a partner who led several media investments and who is still board chairman of MaineToday, is no longer with HM Capital. Mark Semer, a spokesmen for the firm who provided the above statement, did not respond to subsequent requests for information on Brodsky. A receptionist at HM Capital declined to say since when Brodsky was no longer with HM Capital. Brodsky could not be reached for comment.
Bernard Vaughan is a Senior Editor at Buyouts Magazine. Follow his tweets @BVaughanReuters.