McClatchy Co.’s two biggest creditors, Chatham Asset Management and Brigade Capital Management, made a bid to acquire the nation’s second-largest newspaper chain from chapter 11 bankruptcy in exchange for forgiving $263 million in debt.
McClatchy, burdened by debt from pension obligations and its purchase of Knight-Ridder shortly before the Great Recession, filed for bankruptcy in February.
If the deal goes through, McClatchy—which owns The News & Observer, The Charlotte Observer, and the Durham Herald-Sun—would cease to be a family-owned company after 163 years. However, the infusion of capital would enable the company to emerge from bankruptcy despite plummeting ad sales amid the coronavirus lockdown. Last week, McClatchy furloughed 4.4 percent of its workforce, though the cuts did not affect journalists. The company also laid off some executives, including Sara Glines, the president of the N&O.
“In Thursday’s filing,” McClatchy reported, “lawyers for Chatham and Brigade said that, through March 29, professional fees had reached approximately $9 million, which likely exceeded McClatchy’s operating income over the same period”—a remarkable line, considering that the company owns 30 newspapers.
Chatham, which owns The National Enquirer, also offered to pay $30 million to cover McClatchy’s closing costs and outstanding payments to vendors as part of its bid.
This arrangement isn’t certain. McClatchy will have to negotiate with smaller creditors and get both its board and a bankruptcy judge to sign off.
Another obstacle is the federal Pension Benefit Guaranty Corporation, which McClatchy wants to take over the administration of its pension fund. But the PBGC has alleged that McClatchy has been insolvent since 2018 and improperly moved Chatham to the front of the line among creditors.
Contact editor in chief Jeffrey C. Billman at jbillman@indyweek.com.
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