McClatchy Newspapers declare bankruptcy
McClatchy, the second-biggest local newspaper chain in the U.S., filed for protection from its creditors Thursday under Chapter 11 of the U.S. Bankruptcy Code with plans to emerge as a private company.
The filing by Sacramento, Calif.based McClatchy, which cited liabilities ranging up to $10 billion, holds creditors at bay while the company reorganizes its finances. The company has been negotiating with the Pension Benefit Guaranty Corp. to assume over $530.3 million in pension debt, the company’s biggest creditor.
The company, which was founded in 1857 and employs 2,800 people, has also moved to be delisted from the New York Stock Exchange in anticipation of emerging as a private company “in the next few months.”
In a prepared statement, McClatchy Chairman and former Pittsburgh Pirates owner Kevin McClatchy was optimistic about the company’s future.
“McClatchy remains a strong operating company with an enduring commitment to independent journalism that spans five generations of my family,” said Mr. McClatchy, who is the great-greatgrandson of company founder James McClatchy.
“This restructuring is a necessary and positive step forward for the business, and the entire board of directors has made great efforts to ensure the company is able to operate as usual throughout this process.”
McClatchy operates 30 media companies in 14 states, including the Miami Herald, Kansas City Star and News and Observer in Raleigh, N.C. Although print media has been battered in recent years as reader habits change and the industry moves into the digital era, Mr. McClatchy said the company has been making “significant progress in its digital transformation in the past three years.”
McClatchy has expanded its digital-only subscriptions by nearly 50% year over year and is now roughly evenly balanced between total audience and advertising revenues, with digital accounting for 40% of those revenues. The company said it has more than 200,000 digital-only subscribers.
Through the bankruptcy filing, the company obtained $50 million in debtor-in-possession financing from Chicago-based Encina Business Credit LLC, which will be used to finance operations through the reorganization. Combined with normal cash flows, the revolving credit facility is enough to assure continued operations for McClatchy and its newspapers.
McClatchy will seek bankruptcy
court authority to terminate its pension plan and appoint PBGC as the plan’s trustee. PBGC, a government agency, is funded by insurance premiums paid by sponsors of defined benefit plans.
PBGC pays monthly benefits to about 1 million retirees representing nearly 5,000 single-employer plans that folded.
McClatchy wants to settle its pension liabilities by paying the government agency $3.3 million annually for 10 years along with a 3% equity share in the company. But PBGC has sought a much bigger annual payment and equity stake, according to the company.
The company expected total revenue in the fourth quarter to be $183.9 million, down 14% from the same quarter in 2018. For full year 2019, revenues are expected to be $709.5 million, down 12.1% from 2018.
Mr. McClatchy, 57, who owns 53.3% of McClatchy Co.’s class B common shares, is credited with keeping the Pirates baseball team in Pittsburgh when he led a group of investors in buying the team for $95 million in 1996. He was also successful in getting PNC Park built, which was once seen as impossible.
Despite those successes, the Pirates never had a winning season while he was the public face of the ownership group through 2007. The Pirates’ losing ways have mostly continued since then.
“We have the best ballpark in America,” he told the Pittsburgh Post-Gazette in a November interview. “I know there are a lot of frustrated fans at this juncture, but I’m going to always root for the Pirates to do well because we have a great history in this city.”