McClatchy Files Ch. 11 as Newspaper Death March Continues
News publisher McClatchy Co. has filed for Chapter 11 bankruptcy protection in the latest blow to the print news industry.
The publisher obtained $50 million in debtor-in-possession financing which, coupled with its operating cash flows, provides enough liquidity for McClatchy and all its 30 local news outlets to operate as usual, the company said.
The company, one of the largest newspaper publishers in the United States, had been burdened by heavy debt it took on when it bought newspaper chain Knight Ridder Inc in 2006 in a $4.5 billion deal.
McClatchy is also known to have large pension obligations that eat into its profits. Back in January, it said it would hold out on releasing funds for a “small number” of beneficiaries in the nonqualified portion of its Supplemental Executive Retirement Benefits plan.
“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,” McClatchy Chair Kevin McClatchy said during an announcement of the news.
Ownership will be transferred to Chatham Asset Management LLC, a hedge fund who will operate the company like a private entity, according to a report from McClatchy DC. Around 7 million shares of both public and protected family-owned stock will also be cancelled as part of the deal if courts OK the plan.
The company’s $1.4 billion pension plan is also expected to be transferred to the U.S. government’s Pension Benefit Guaranty Corp. As of Jan. 1, 2019 the pension plan covered 24,500, while the company employs fewer than 3,000 in 2019, according to a court filing.
“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 said.
The company has secured $50 million in funding from Encina Business Credit to keep its 30 newsrooms across 14 states afloat amid the bankruptcy process, and McClatchy spokesperson Jeanne Segal told USA Today in an email that there would be “no layoffs associated with this filing.”
This is only the latest in a string of hits to the struggling print newspaper business. In January, Berkshire Hathaway co-founder and investing guru Warren Buffett announced his firm was getting out of the business by selling its group of 30 daily newspapers to Lee Enterprises for $140 million.
Reuters contributed to this report.