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Saudi owned upi massive debt { April 24 1999 } Original Source Link: (May no longer be active)
http://www.auburn.edu/~lowrygr/ep.htmlhttp://www.auburn.edu/~lowrygr/ep.html
'UPI Looks for Way out of Massive Debt'
Here is a story from the April 24, 1999, edition of Editor & Publisher on UPI's continuing struggles:
United Press International officials are searching for U.S. investors while their six Saudi Arabian owners debate how to finance the wire service's massive debt.
The Saudis wired $3 million to UPI's Washington headquarters, on April 16, to pay off a fraction of the $18.8 million the Saudis had pledged by the close of the 1998 calendar year. The $3 million payment is the first since a Feb. 1 emergency meeting between Arnaud de Borchgrave, UPI's CEO and president, and the wire service's principal Saudi owners. The Saudis now say they will wire bimonthly payments to UPI until the wire service can make it on its own, a promise it made and reneged on last year. The financial debacle is convincing de Borchgrave to sound out U.S. investors about purchasing shares of UPI, a privately held news organization.
"We hope to meet with groups in the United States who might be interested in investing in UPI," says de Borchgrave.
The money crunch became so severe UPI switched two consecutive biweekly payrolls to paper checks from direct deposits to gain an extra 24 hours of breathing room, according to UPI employees. The Saudi owners, UPI's Board of Directors, and shareholders will meet next month in Paris with de Borchgrave to try and work out the various internal disputes.
De Borchgrave became UPI's CEO last December just as the Middle East Broadcasting Centre, a Saudi-owned television network, was divesting itself of most of its holdings in the wire service.
UPI is becoming World Wide Holding, a London-based organization which is controlled by a variety of Saudi industrialists and bankers, according to officials.
Sources say the group includes Shafiq bin Laden, mohammed H. Al Amoudi, Sheik Abdullah Alireza, Sheik Omar al Isia, Sheik Mari'e Abdullah Bugshan, and Ahmed H. Badeeb, chairman of the board of World Wide.
The names of the new board are so secret that UPI's public relations office still lists Middle East Broadcasting as UPI's parent company.
Badeeb replaced Sheik Waleed Al Ibrahim as chairman of the UPI board. Ibrahim, whose sister is married to King Fahd, remains on the UPI board and retains a small financial position at World Wide.
The internal dispute that cost Al Ibrahim control of UPI also ends the reigh of Dr. Abdallah H. Masry, of ARA Group International, the umbrella organization of the Arabic News Service, MBC and UPI/World Wide News.
De Borchgrave refuses to confirm the new lineup of Saudi businessmen who have acceded to power positions at UPI.
De Borchgrave is the first UPI CEO to have access to the wire service's bleeding bottom line books. He also received assurances that he would receive regular subsidies until the company regains its financial health.
MBC bought UPI in 1992 out of bankruptcy court and has been subsidizing its increasing debt -- which hit $120 million last year -- ever since.
"Nothing has changed," says a digusted UPI insider. "They do things the Middle East way, very slowly. They just don't understand how this business works."
De Borchgrave, 72, a former editor in chief of The Washington Times and a longtime chief foreign correspondent, ran UPI's Brussell's bureau more than 40 years ago.
He was lured back to UPI by the Saudis with a promise that he could embark on a two-year plan to get the wire service out of the red. "I budgeted us for $18.8 million for the next two years," says de Borchgrave. "My job has become immensely complicated by all this."
Just before de Borchgrave joined UPI, the wire service closed down its prestigious New York City bureau, firing some newspeople and shifting others to offices at the United Nations.
UPI's reporters outside of Washington, D.C., work in their homes in what are virtual bureaus, serving mostly broadcast outlets. The wire service has only 30 newspaper clients left from its glory days of the 1960s.
De Borchgrave's predecessor, James Adams, a flamboyant former London Sunday Times managing editor, resigned last August to set up his own firm and took seven key staffers with him. Several key officials accused Adams of using wire service personnel and equipment to set up his own firm, a charge that he has strongly denied.
Adams, who joined UPI in August 1997, with a promise to revitalize the organization, quickly found himself in a financial quagmire. At one point, Adams threatened to close down the wire service if the Saudis did not deliver the promised operating capital. He eventually wrote a letter to MBC warning that his fiduciary responsibility was being compromised by its alleged refusal to allocate the funds needed to run UPI. Adams went searching for new capital and came to an agreement with Pattinson Hayton, a controversial Austrialian investment advisor with Netvest, a Hong Kong company.
The Saudi investors, however, rejected Hayton's offer. He tells E&P that the Saudis hemmed and hawed too long for a deal to be consummated.
"They wanted us to fly around Saudi Arabia for a couple of weeks," Hayton says. "You have to know the Middle East mentality. They take their time doing things. That wouldn't be practical for us."
UPI officials maintain, however, that they rejected Hayton's offer after a background check that included the reading of a harsh profile of him in Wired News Online.
The article in March 1998 alleged that Hayton had been "sanctioned repeatedly over the last 15 years by security regulators in both the United States and Great Britain" and avoided a U.S. Immigration and Naturalization order to be deported by marrying a U.S. citizen.
Hayton says the Wired article is filled with "hearsay and innuendo. You can't fight that kind of thing."
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