Averting a Crisis p.

By: George Garneau

Financial problems nearly close down New York Post as lenders cut off credit; buyer steps forward to temporarily keep it open sp.

THE NEW YORK Post suddenly went into a financial crisis Jan. 22 and nearly closed down after lenders cut off credit, but got a reprieve when a wealthy businessman agreed to buy the paper from Peter Kalikow.
Self-made businessman Steven Hoffenberg, who heads the debt-collection company Towers Financial Corp., said he has taken effective control of the Post and will write a column.
"We are operating it. We don't have the stock yet," he said.
A formal closing was being prepared for Hoffenberg to assume ownership of the chronically money-losing Post, founded by Alexander Hamilton 192 years ago.
He said in an interview that he put up $2.5 million in cash and was assuming $23 million in liabilities. He said the paper lists $70 million in assets, including its valuable South Street property in the Wall Street financial district.
Before Hoffenberg emerged from nowhere, Kalikow, himself in personal bankruptcy, gave 720 Post employees a weekend ultimatum: accept another 20% pay cut for 30 days or the paper closes Jan. 25.
Workers agreed and Monday's Page One headline said: "Never say die."
The 438,000-circulation tabloid also raised its newsstand price 10? to 50?. The cost cuts and added circulation revenue were expected to put the Post at break-even or to yield a small operating profit.
The latest crisis broke when Bankers Trust refused to renew its $5 million line of credit?following a disappointing holiday season and the departure of potential investor Leon Black. Kalikow's newspaper and real estate holdings reportedly owe the bank $30 million.
Hoffenberg has pledged to supply the paper's immediate cash needs and disclosed plans to borrow $10 million to $15 million against the paper's assets in the next 60 days. He said Bankers Trust has agreed to remain a lender, and other banks have agreed to extend credit.
Kalikow threatened to close the paper in September 1990, when he forced the unions to take a 20% pay cut, saving about $20 million a year and reducing the workweek to four days.
Kalikow bought the Post in 1988 for $38 million from Australian-born publisher Rupert Murdoch, who estimated it lost $150 million since he bought it from Dorothy Schiff in 1976 for $31 million.
Kalikow went into personal bankruptcy in 1991 after failing to make payments on real estate loans.
Hoffenberg said he would ask Post employees and creditors to share in ownership.
"I would like to see the Post become a public company. That is our goal for 1993," he said.
Hoffenberg described the Post as "a good, solid business, but it's not being run now by financial people. We're financial people. We operate businesses. We understand how to make a business move forward."
He said he was "cooperating totally" with the Post's unions, and he intended to return pay to full scale, but declined to say when.

History of lawsuits

Within days after Hoffenberg stepped forward, press reports disclosed a history of lawsuits involving his business dealings and he revealed some unusual ideas for the Post?leaving the white knight with somewhat tarnished armor.
A 48-year-old college dropout from Brooklyn, Hoffenberg in the early 1970s founded Towers Financial Corp., which he said he built into a $1.5 billion-a-year group of companies specializing in buying accounts receivable at a discount and trying to collect. It also has holdings in insurance and financial services.
New York papers reported that the Securities and Exchange Commission accused Towers of selling $34 million in unregistered securities to the public five years ago?a charge that was settled with no admission of guilt. Several states have barred Towers from selling stock there.
In 1980, Hoffenberg and two partners were sued for fraud over their acquisition of a hardware supplier. A $300,000 settlement remained pending.
He paid $10,000 to settle a 1976 case in which a bankruptcy trustee alleged he fraudulently removed assets from a company he headed.
The Manhattan district attorney was investigating charges Towers employees cheated clients out of debts collected.
"I run a billion and a half dollar business. If you think you can run a business that big and not have lawsuits, that's not the way it works. I don't know why that's a big issue," he said. "Every single big company in the U.S. has a lot more suits than I do."
Hoffenberg proposed some unusual ideas for the Post.
He said 1,000 Towers employees would help sell Post advertising to area businesses.
"We are aggressively in the marketplace seeking sales," he said.
He said the Post would barter with advertisers. Instead of selling advertising for money, it would accept, for example, clothing or television advertising.
"We will take merchandise off the shelves in return for giving them pages and pages of ads, and resell it to outlets throughout the country. It's done all over the European common markets."
Though he said he had no plans to change the Post's aggressive and competitive editorial product, he responded to questions about past scrapes in civil courts by telling a New York Times reporter: "You have not asked one positive question . . . . The New York Post is not about negativity. I am against negative reporting and will tell that to our reporters."
The Post crisis came three weeks after the Daily News ended its latest battle against extinction. It was bought from bankruptcy by Mortimer Zuckerman, the real estate investor who publishes U.S. News & World Report.
The other tabloid in town, Times Mirror Co.'s New York Newsday, is losing millions of dollars a year.