News Publisher McClatchy Files for Bankruptcy Protection
By MICHELLE CHAPMAN AP Business Writer
The publisher of the Miami Herald, The Kansas City Star and dozens of other newspapers across the country is filing for bankruptcy protection.
McClatchy operates 30 daily news organizations as well as the Youngstown-based Mahoning Matters, launched in October in the wake of The Vindicator closing. The online publication is the first digital site to be created throught The Compass Experiment, which is part of a $300 million Google-funded partnership to fund local news.
The company’s newsrooms, including The Charlotte Observer, The News & Observer in Raleigh, and The Star-Telegram in Fort Worth, will continue to operate as usual as the publisher reorganizes under Chapter 11 bankruptcy protection.
Under its reorganization plan, “about 60% of its debt would be eliminated as the news organization tries to reposition for a digital future,” reports McClatchy’s DC Bureau.
The new owners, pending court approval, would be Chatham Asset Management LLC, a hedge fund that would operate McClatchy as a privately held company, according to the report.
The publisher’s origins date to 1857 when it first began publishing a four-page paper in Sacramento, California, following the California Gold Rush. That paper became The Sacramento Bee.
McClatchy has received $50 million debtor-in-possession financing from Encina Business Credit. That, combined with normal operating cash flows, will provide enough cash for the company, still based in Sacramento, to continue to function.
“When local media suffers in the face of industry challenges, communities suffer: polarization grows, civic connections fray and borrowing costs rise for local governments,” said CEO Craig Forman. “We are moving with speed and focus to benefit all our stakeholders and our communities.”
McClatchy expects fourth-quarter revenues of $183.9 million, down 14% from a year earlier. Its 2019 revenue is anticipated to be down 12.1% from the previous year. That would mean that the publisher’s revenue will have slid for six consecutive years.
The company expects to pull its listing from the New York Stock Exchange as a publicly traded company, and go private.
McClatchy filed for bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York. Its restructuring plan needs approval from its secured lenders, bondholders and the Pension Benefit Guaranty Corp.
According to court documents, PBGC is the company’s largest unsecured creditor, owed $530.4 million. The list includes Bank of New York Mellon, $14.9 million; Gannett Supply Corp., $1.65 million, and Google Inc., which is owed $800,000.
McClatchy has suffered as readers give up traditional subscriptions and get news online and like other publishers, it’s tried to follow them there.
Digital-only subscriptions have increased by almost 50% year over year, McClatchy said, and subscriptions are now roughly evenly balanced between total audience and advertising revenues, with digital accounting for 40% of those revenues and growing. The company has more than 200,000 digital-only subscribers and over 500,000 paid digital customer relationships.
Independent newspapers and chains alike are struggling. The estimated total U.S. daily newspaper circulation including both print and digital in 2018 fell 8% from the prior year to 28.6 million for weekday. Sunday circulation fell 9% to 30.8 million, according to the Pew Research Center for Journalism and Media.
Last year, New York Times executive editor Dean Baquet bleakly predicted the demise of “most local newspapers in America” within five years, except for ones bought by billionaires. The Washington Post and Los Angeles Times, both national publications, are thriving after being bought by billionaires. The Boston Globe, Minneapolis Star-Tribune and Las Vegas Review-Journal are among other major American newspapers that appear to have steadied themselves after being sold to local wealthy individuals.
“McClatchy remains a strong operating company with an enduring commitment to independent journalism that spans five generations of my family,” said Chairman Kevin McClatchy, the great-great grandson of the company founder, James McClatchy.
The company has also worked on its financials, trimming operating expenses by $186.9 million for the three-year period ended in December. It’s also paid off about $153.5 million in debt in the same period.
Forman said McClatchy doesn’t anticipate any adverse impact on qualified pension benefits for substantially all of the plan’s participants and beneficiaries.
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