On Thursday, McClatchy Co., which owns The Charlotte Observer, The News & Observer, and The Durham Herald-Sun, along with 27 other newspapers in 13 other states, filed for bankruptcy. It was less of a surprise than a shock. 

The company has been burdened by debt from the acquisition of Knight-Ridder in 2006 and its own pension fund. If a court agrees to its reorganization proposal, McClatchy will shed 55 percent of its debt and offload most of its pension obligations to the feds. In the short term, its papers shouldn’t be affected. 

The downside is what comes next. After 163 years, the McClatchy family would give up control of the company. The hedge fund Chatham Asset Management would take over—and take the company private. Chatham has media experience: a controlling stake in American Media Inc., which owns The National Enquirer, Men’s Journal, Us Weekly, and other publications. It said last week that it’s “committed to preserving independent journalism and newsroom jobs.” 

Maybe. Chatham isn’t the worst hedge fund that could own McClatchy. That would be Alden Global Capital, the industry vulture founded by Duke alum Heath Freeman that has systematically dismembered once-great papers like the Denver Post. Alden may get a crack at McClatchy yet. 

The question is what Chatham does once McClatchy’s balance sheets are cleaned up, probably mid-year. This is an age of media consolidation, after all. Last year, McClatchy made a play for Tribune, which rejected its overtures. The new McClatchy will look more attractive, and a merger’s cost-savings will make financial sense. 

As the Nieman Lab’s Ken Doctor has reported, Alden owns about a third of Tribune stock and is already pulling strings inside the company. On June 30, around the time McClatchy likely emerges from bankruptcy, Alden’s agreement not to pursue a hostile takeover of Tribune will expire. So it’s not hard to envision a future in which Alden has swallowed up and started slicing and dicing Tribune—and McClatchy becomes part of that hollowed-out family. 

That’s a worst-case scenario. In more optimistic consolidations, McClatchy or Tribune runs the show instead of Freeman. In the best case, local investors take the North Carolina papers off Chatham’s hands.

But this business rarely inspires optimism these days, especially when the words “hedge fund” and “newspaper” appear in the same story. 

Contact editor in chief Jeffrey C. Billman at jbillman@indyweek.com. 

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