Storied Newspaper Publisher McClatchy Files for Chapter 11 Bankruptcy
Posted on 02/14/2020
Newspaper giant McClatchy Co. (The McClatchy Company) filed for Chapter 11 bankruptcy. McClatchy senior executives tried to avoid bankruptcy. The newspaper company attempted several regulatory and legislative avenues to address its pension and debt obligations.
The bankruptcy allows the media company to restructured its debt and, in a bid, to excise its pension fund obligations. The reorganization seeks to deal with an estimated pool of US$ 700 million in debt.
The big loser for now are the company’s shareholders. More than 7 million shares of both publicly available and protected family-owned stock would be canceled. The new owners of the paper would most likely be Chatham Asset Management LLC, a hedge fund.
“While this is obviously a sad milestone after 163 years of family control, McClatchy remains a strong operating company and committed to essential local news and information,” said Kevin McClatchy, company chairman, in a release to the public. “While we tried hard to avoid this step, there’s no question that the scale of our 75-year-old pension plan – with 10 pensioners for every single active employee – is a reflection of another economic era.”
McClatchy secured US$ 50 million debtor-in-possession financing from Encina Business Credit, LLC to ensure business operations. Formed in March 2016, Encina Business Credit is an asset-based lending platform backed by Encina Capital Partners, an investment firm focused on specialized lending and leasing platforms, and an affiliate of certain funds managed by Oaktree Capital Management, L.P.
McClatchy’s first newspaper was The Daily Bee, first published in Sacramento, California, on February 3, 1857, by Native American writer Rollin Ridge.
Some of the biggest papers included in McClatchy’s portfolio include the Kansas City Star, the Miami Herald, the Charlotte Observer, the Fort Worth Star-Telegram, and the Sacramento Bee.
On March 13, 2006, McClatchy agreed to buy newspaper company Knight Ridder for approximately US$ 4.5 billion in cash and stock. The Knight Ridder newspaper chain included the San Jose Mercury News, The Philadelphia Inquirer, as well as the first Knight newspaper. In a March 2006, NPR story, Marie Ridder, a member the families that once controlled Knight Ridder, said regarding to the McClatchy takeover, “They run reliable newspapers.” She added, “They are newspaper people of high integrity — unlike almost anybody else.”