McClatchy Co. announces Chapter 11 bankruptcy filing

After more than 160 years of family ownership, McClatchy Co. announced on its website, Thursday, that it has filed Chapter 11 which, under a plan outlined in its filing to a federal bankruptcy court, will eliminate about 60 percent of the news organization’s reported $703 million in outstanding debt. Unfunded pension obligations (that were estimated at more than $805 million last July) are the proximate cause of the filing. If the court accepts the plan, Chatham Asset Management LLC—a New Jersey-based hedge fund that last year reported more than $4.4 billion in assets under management on behalf of 14 clients—will most likely become the new owners and will operate McClatchy as a privately held company.

McClatchy is the second largest local news company in America. Kevin McClatchy, Chairman of the business, is quoted as saying, “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.”

Because it has secured $50 million in new financing from Encina Business Credit to ensure it can continue operation during this time of transition, McClatchy has reported that this bankruptcy filing will have no immediate impact on the company’s employees. The Miami Herald, the Charlotte Observer, and The Telegraph (frequently called The Macon Telegraph) are among the 30 newsrooms in 14 states that are owned by McClatchy.

Executives of McClatchy fought for months to avoid Thursday’s filing, but were unsuccessful. Negotiations with creditors intensified last year, and just weeks ago, Congress excluded McClatchy from newspaper pension relief which would have prevented the need for the company to choose among meeting pension requirements, paying bond holders, or seeking bankruptcy protection.

McClatchy’s advertising revenue fell by 80 percent and daily print circulation fell by 58.6 percent between 2006 and 2018. And while the company worked over three years to achieve a more sustainable 50-50 split (print vs. digital advertising), those gains could not outpace the approaching pension and debt obligations.

In filing for Chapter 11, McClatchy is following a familiar path for legacy newspaper companies. Other newspaper companies, including Tribune, Lee Co. and New Media/Gatehouse, preceded McClatchy on this bankruptcy-restructuring path.

Houston Home Journal reached out to the The Macon Telegraph for comments, but did not get a direct response. The request for a return call was passed along to a spokesperson for McClatchy who advised that any further information needed could be found in the open letter (from Craig Forman, CEO of McClatchy) that can be read by the public online.

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