Hedge funds duel over chain of McClatchy newspapers

A battle of the hedge funds is brewing in the bankruptcy auction of McClatchy Co., one of the nation’s largest and most decorated newspaper chains, pitting Chatham Asset Management and Brigade Capital Management, both debt holders in the chain, against a newcomer to the proceedings, Alden Global Capital.

Chatham and Brigade seemed to have an advantage going into the planned court-supervised sale of McClatchy. In April, McClatchy said it had received an offer worth more than $300 million from the two firms. The bid came after Chatham and Brigade had taken on much of McClatchy’s debt in a Chapter 11 restructuring. The two hedge funds planned to use that debt as part of the bid, which would keep the chain, with 30 newsrooms across the country, intact.

Alden, a New York hedge fund that has become a force in the newspaper business, tried to disrupt the Chatham-Brigade proposal Wednesday by filing an emergency motion in a U.S. Bankruptcy Court. Alden asked Judge Michael E. Wiles to stop any attempt to buy McClatchy through a credit bid, a transaction that would allow Chatham and Brigade to use the company debt they had assumed toward the purchase price.

Alden’s maneuver suggested that it, too, had an interest in acquiring McClatchy, a 163-yearold chain that fell on hard times not long after its $4.5 billion purchase in 2006 of a much larger rival, Knight Ridder.

At a remote hearing Thursday, Alden’s interest was confirmed by a lawyer for the hedge fund, Lisa G. Beckerman of Akin Gump Strauss Hauer & Feld. She said Alden was prepared to “top” the previous bid but argued that Chatham and Brigade would have an unfair advantage if they were allowed to make the debt they had accrued part of their offer. Wiles denied Alden’s motion, permitting Chatham and Brigade to go ahead with their plan.

The court also scheduled a new date for the start of the auction process, setting it for Friday. It had previously been scheduled to start Wednesday.