An­other news­pa­per chain seeks shel­ter from storm

Debt-rid­den McClatchy files for bank­ruptcy pro­tec­tion

Baltimore Sun - - ENTERTAINM­ENT - By Tali Arbel and Michelle Chap­man

NEW YORK — McClatchy, the pub­lisher of the Mi­ami Her­ald, The Kansas City Star and dozens of other news­pa­pers, 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.”

The news­pa­per in­dus­try has been deeply hurt by chang­ing tech­nol­ogy that has sent the vast ma­jor­ity of people on­line in search of news. Me­dia com­pa­nies have tried to shift on­line, with vary­ing de­grees of success, as their print ad rev­enue and cir­cu­la­tion de­clined. Com­pli­cat­ing mat­ters, in­ter­net com­pa­nies Face­book and Google re­ceive most on­line ad dol­lars.

While some na­tional news­pa­pers, like The Wall Street Jour­nal and The New York Times, are adding dig­i­tal sub­scribers, help­ing them nav­i­gate ad­ver­tis­ing de­clines, many lo­cal out­lets have had a dif­fi­cult time. That has led to a string of con­sol­i­da­tion, much of it in­volv­ing in­vest­ment firms.

Gan­nett, the USA To­day pub­lisher, was bought last year by GateHouse, a chain man­aged by pri­vate eq­uity firm Fortress, in a deal helped by a high-in­ter­est, $1.8 bil­lion loan from an­other fi­nan­cial firm, Apollo. It is the largest news­pa­per chain in the U.S. An­other large chain, Me­di­aNews, is owned by a hedge fund with a rep­u­ta­tion for cut­ting costs and jobs, Alden Global.

McClatchy’s 2006 pur­chase of the Knight-Rid­der news­pa­per chain for $4.5 bil­lion added to McClatchy’s debt and con­trib­uted to its fi­nan­cial woes as the in­dus­try’s de­cline ac­cel­er­ated in sub­se­quent years.

Though fi­nan­cial re­sults aren’t yet fi­nal, the com­pany es­ti­mates that 2019 rev­enue fell 12.1% from the pre­vi­ous year, its sixth con­sec­u­tive an­nual de­cline. McClatchy said its dig­i­tal-only sub­scrip­tions have grown al­most 50% to 200,000 over the past year.

But that growth has not off­set the loss of ad­ver­tis­ing rev­enue that once flowed to its print news­pa­pers.

McClatchy said it re­mained com­mit­ted to jour­nal­ism. “When lo­cal me­dia suf­fers in the face of in­dus­try chal­lenges, com­mu­ni­ties suf­fer,” CEO Craig For­man said.

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