Indebted US newspaper chain McClatchy seek bankruptcy protectionBusiness | 14 Feb 2020 4:31 pm
McClatchy, the publisher of the Miami Herald, The Kansas City Star and dozens of other newspapers in hthe US, has filed for bankruptcy protection as it struggles to pay off debt while revenue shrinks because more readers and advertisers are going online.
McClatchy said Thursday that its 30 newspapers will continue to operate normally as it reorganizes under Chapter 11 bankruptcy protection, helped by $50 million in financing from Encina Business Credit.
The company hopes to emerge from bankruptcy protection in a few months as a private company, with majority ownership by a hedge fund that’s currently McClatchy’s largest shareholder and debtholder, Chatham Asset Management. That would end 163 years of family control.
It’s also looking to unload its pension obligations to a federal corporation that guarantees pensions, so that employees would get the benefits they were entitled to.
McClatchy did not announce any layoffs and tried to reassure employees, saying that while “we are always looking at opportunities to improve operational efficiencies,” the Chapter 11 process is “not geared around cost take-outs.”
In court documents, McClatchy said 40% of its revenue now comes from digital sources. It said it is trying to shift away from being so reliant on advertising. It said half its revenue now comes from advertising, and half from circulation. The company said that for 2019, ad revenue fell 19%, while circulation revenue dropped 5%.
McClatchy has struggled to pay money owed to its pension fund and has been in negotiations with the Pension Benefit Guaranty Corporation, a federal guarantor of pensions, to assume control. In Thursday’s filing with U.S. Bankruptcy Court in New York, it is seeking permission to appoint that corporation as the plan’s trustee. McClatchy said “substantially all” of the plan’s participants and beneficiaries should get their entitled benefits.
McClatchy plans to pull its listing from the New York Stock Exchange as a publicly traded company. Chatham Asset will be the new majority owner. Chatham also is the majority shareholder of Canadian newspaper chain Postmedia and owns National Enquirer publisher American Media Inc. American Media is in the process of selling the Enquirer.
McClatchy said it remained committed to journalism.
“When local media suffers in the face of industry challenges, communities suffer: polarization grows, civic connections fray and borrowing costs rise for local governments,” CEO Craig Forman said. “We are moving with speed and focus to benefit all our stakeholders and our communities.”
In a statement, Chatham said it was “committed to preserving independent journalism and newsroom jobs.” Chatham said it has been “a supportive investor” in McClatchy since 2009.-AP