By JOSH FRIEDMAN
A New Jersey-based hedge fund has won the right to buy bankrupt newspaper publisher McClatchy, which owns the San Luis Obispo Tribune, as well as collection of nationwide papers.
Chatham Asset Management entered the winning bid in an auction held as part of a bankruptcy court-supervised sale of McClatchy.
In February, McClatchy announced it filed for Chapter 11 bankruptcy, a move due in large part to the company’s overburdened pension system. At the time, McClatchy Chairman Kevin McClatchy reported the company had a ratio of 10 retirees collecting pensions for every one active worker.
Former Tribune publisher Joseph “Chip” Visci and editor Sandra Duerr have unsecured claims against McClatchy’s bankruptcy for executive retirement compensation, which a judge has not yet ruled on. Duerr’s claim is for $115,646 and Visci’s is $657,667.
Upon filing for bankruptcy, the company also said Chatham Asset Management would likely lead the McClatchy’s new ownership team. Chatham then submitted the wining bid in an auction held Friday.
Chatham’s purchase agreement with McClatchy calls for restructuring of the publisher’s debt and pension obligations. McClatchy expects the Pension Benefit Guaranty Corporation (PBGC) to assume its qualified pension plan. McClatchy is contributing approximately $1.4 billion in pension assets to the PBGC, according to a McClatchy press release.
“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,” said Craig Forman, CEO and president of McClatchy. “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.”
McClatchy is expected to exit bankruptcy in the third quarter of 2020 while maintaining control of all 30 of its newspapers. The company publishes 30 newspapers in 14 states, including five in California.
Chatham’s purchase of McClatchy will end family control of the company, which has existed since its founding in 1857.
For more than a decade, McClatchy stock has been in decline. Fifteen years ago, McClatchy’s share price was more than $700. It is currently about 15 cents.
Last month, amid the bankruptcy process, McClatchy decided to make seven of its newsrooms, including the San Luis Obispo Tribune’s, operate remotely for the remainder of 2020.