‘Fortune’ Details Big Financial Problems at ‘Forbes’

Steve Forbes says article's 'intention is to harm our business'

In a new article, Fortune reveals the details behind the financial troubles of its rival, Forbes. According to internal documents obtained by Fortune, Forbes’ finances have been even worse than most had estimated.

In 2006, near the height of the market, private equity firm Elevation Partners (co-founded by Bono and Roger McNamee) bought a minority stake in Forbes Media. But according to documents from banker J.P. Morgan acquired by Fortune, that investment has proved to be a disaster. Elevation projected that Forbes would generate earnings close to $90 million in 2009; instead, the company reported operating losses of $19.7 million.

Last year, the company went into default on a $90 million credit line. J.P. Morgan and six other lenders agreed to amend the loan, but at a price: Forbes had to sell off its online financial dictionary Investopedia, replace Steve Forbes as CEO, and reach certain financial targets.

Fortune also reports that the Forbes family has been selling off its assets—including a private island in Fiji, a palace in Tangier, a Boeing 727, and the world's largest private collection of Fabergé eggs—to keep the company afloat. The Forbes clan, however, apparently managed to pull more than $100 million from the Elevation deal.

After the Fortune article was published, Steve Forbes attempted to smooth things over in an internal memo. “Though the intention is to harm our business,” he wrote, “it will not adversely impact Forbes because it highlights a very difficult time in the past when all the media industry was going through unprecedented upheaval.”

In an attached statement, Forbes Media claims to be “profitable and in full compliance with all bank loan covenants,” and notes that although the entire media industry has seen hard times in the past several years, Forbes has had great success, and that the company has had the full support of Elevation.

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