Chatham makes win­ning bid in auc­tion to buy McClatchy

The News Tribune - - Nation & World - BY KEVIN G. HALL khall@mc­clatchydc.com

Chatham As­set Man­age­ment, the New Jer­sey hedge fund that is McClatchy Co.’s largest cred­i­tor, has won an auc­tion to buy the bank­rupt lo­cal news com­pany.

Under the pro­posed deal that will be sub­mit­ted to the bank­ruptcy court for ap­proval, Chatham would buy the en­tire com­pany, McClatchy said Sun­day.

“As long-stand­ing sup­port­ive in­vestors in McClatchy, we are pleased with the out­come of the auc­tion,” Chatham said in a state­ment. “Chatham is com­mit­ted to pre­serv­ing news­room jobs and in­de­pen­dent jour­nal­ism that serve and in­form lo­cal com­mu­ni­ties dur­ing this im­por­tant time.”

The auc­tion was Fri­day, af­ter a fed­eral judge re­jected a last-minute chal­lenge by a sec­ond hedge fund, Alden Cap­i­tal Group, to Chatham’s start­ing bid.

Chatham was the only bid­der pub­licly iden­ti­fied un­til Alden filed its chal­lenge in court late Wed­nes­day. McClatchy has said that more than 20 par­ties ex­pressed ini­tial in­ter­est in the com­pany and that “mul­ti­ple bid­ders” sub­mit­ted bind­ing bids by the July 1 dead­line.

The com­pany has de­clined to iden­tify bid­ders or to provide details about the bids, cit­ing non-dis­clo­sure agree­ments. In an ear­lier court fil­ing that ef­fec­tively served as a floor to open the bid­ding, Chatham had of­fered to ac­quire McClatchy for about $300 mil­lion, a com­bi­na­tion of debt cred­its and at least

$30 mil­lion in cash.

Alden al­leged that some of McClatchy’s un­se­cured, or less pro­tected, debt might be in­cluded in Chatham’s deal and that it was im­proper be­cause bank­ruptcy Judge Michael E. Wiles has sig­naled that the is­suance of the un­se­cured debt in 2018 could be open to lit­i­ga­tion. But Wiles re­jected the chal­lenge, clear­ing the way for the auc­tion to pro­ceed.

Chatham and

McClatchy are fi­nal­iz­ing terms of the deal, known as an as­set pur­chase agree­ment, which must be ap­proved by McClatchy’s board of direc­tors be­fore the com­pany no­ti­fies the bank­ruptcy court of a suc­cess­ful bid.

McClatchy said it plans to make that no­ti­fi­ca­tion by Wed­nes­day.

Wiles, who has presided over McClatchy’s case in the U.S. Bank­ruptcy Court for the South­ern Dis­trict of New York, is sched­uled to con­firm the win­ning bid at a hear­ing July 24.

“From the out­set of this vol­un­tary Chap­ter 11 fil­ing, our aim was to per­ma­nently ad­dress both the com­pany’s legacy debt and pen­sion obli­ga­tions and strengthen our bal­ance sheet in or­der to provide greater cer­tainty and sta­bil­ity to the wider group of our col­leagues and stake­hold­ers who ben­e­fit from a re­struc­tured McClatchy,” Craig For­man, pres­i­dent and CEO of McClatchy, said in a state­ment Sun­day.

“We’re pleased that Chatham and the sup­port­ive se­cured first-lien cred­i­tors be­lieve in our busi­ness and our mis­sion and are help­ing to achieve these goals.”

When McClatchy, the na­tion’s sec­ond largest lo­cal news com­pany, filed for Chap­ter 11 bank­ruptcy in Fe­bru­ary, its re­struc­tur­ing plan called for Chatham, which has been an in­vestor since 2009, to emerge as owner. The com­pany, whose stock had been pub­licly traded, would be under pri­vate own­er­ship.

Af­ter the pan­demic dis­rupted the econ­omy in March, McClatchy added a sec­ond exit op­tion, putting it­self up for sale.

Chatham is the ma­jor­ity owner of Canada’s largest news chain, Ot­tawa-based Post­media Net­work Canada Corp., and also owns Amer­i­can Me­dia, pub­lisher of the Na­tional En­quirer.

Alden, based in New York, took own­er­ship of bank­rupt Me­di­aNews Group, whose flag­ship ti­tle is the Den­ver Post, about a decade ago. It also owns about a third of Tri­bune Co., which twice dis­cussed merg­ing with McClatchy be­fore the bank­ruptcy fil­ing.

McClatchy said it was forced into bank­ruptcy by the twin bur­den of debt from the 2006 pur­chase of Knight Rid­der and legacy pen­sion obli­ga­tions.

Wiles had been sched­uled to hold a hear­ing this week on McClatchy’s re­quest for ap­proval of a dis­tressed ter­mi­na­tion of its pen­sion pro­gram, but that has been pushed back to Aug. 26.

The fed­eral Pen­sion Ben­e­fit Guar­anty Cor­po­ra­tion, which takes over pen­sions of dis­tressed com­pa­nies, would as­sume McClatchy’s qual­i­fied pen­sion plan. McClatchy would trans­fer roughly $1.4 bil­lion in assets.

McClatchy was con­trolled by the McClatchy fam­ily for 163 years be­fore declar­ing Chap­ter 11 bank­ruptcy in Fe­bru­ary. The com­pany owns 30 me­dia ti­tles in 14 states and Washington, D.C., in­clud­ing the Mi­ami Her­ald, the Kansas City Star, the Sacra­mento Bee, the Char­lotte Ob­server, the (Raleigh) News & Ob­server, and the Fort Worth Star-Tele­gram.

Kevin G. Hall: 202-383-6038, @Kev­inGHall

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