McClatchy newspapers chain publisher for bankruptcy and declining print revenue
McClatchy Co., America’s second-largest newspaper chain, filed for Chapter 11 bankruptcy protection Thursday amid mounting debt obligations and a dramatic loss of print revenue, a development seen as the continuance of the country’s news crisis. one of the nation’s largest newspaper publishers, filed for bankruptcy protection Thursday, another harbinger of America’s deepening local news crisis.
The Chapter 11 filing will allow the Sacramento-based company to keep its 30 newspapers afloat while it reorganizes more than $700 million in debt, 60 percent of which would be eliminated. If the plan wins court approval, control of the 163-year-old family publisher would be turned over to hedge fund Chatham Asset Management, its largest creditor. McClatchy’s 30 mastheads will continue to operate normally, according to the Washington Post, with the company taking on an additional $50 million in financing from Encina Business Credit.
McClatchy’s stock will be delisted soon, and if approved by the court, control of the company will be given to Chatham Asset Management, a New Jersey hedge fund overseeing some $4.4 billion.
McClatchy’s filing foreshadows further cost-cutting and retrenchment for one of the biggest players in local journalism, at a time when most American newsrooms already are straining to cover their communities amid declining ad revenue and dwindling resources. Twenty percent of all U.S. newspapers have closed since 2004, according to a recent report from PEN America, and the sector has shed 47 percent of its jobs.
The company has long struggled with its pension obligations, which as of March 2019 was underfunded by $535 million.
McClatchy’s 2004 $4.5 billion acquisition of competitor Knight-Ridder increased the number of papers under its purview, but also saddled the company with an additional $2 billion of debt.
Over $700 million in debt will be reorganized during the bankruptcy process, according to the Post, with 60% planned for elimination.
Shares of McClatchy were up almost 9.5% at 75 cents in pre-trading hours; at the company’s peak in 2005, shares traded at $740.
“While we tried hard to avoid this step, there’s no question that the scale of our 75-year-old pension plan–with 10 pensioners for every single active employee–is a reflection of another economic era,” said chairman Kevin McClatchy.
Almost 50%. That’s how many newspaper jobs disappeared between 2008 and 2018, according to the Pew Research Center. A combination of the 2008 financial crisis and declining print revenue, paired with the rise of digital publishing and tech giants like Facebook and Google, have all hurt newspapers’ abilities to stay profitable. 225 counties across America no longer have a local paper. The remaining 50% have just one local paper, published once per week.
James Asher, McClatchy’s Washington, D.C. bureau chief from 2011 to 2016. “The Washington Post and New York Times doubled down on national and international operations that brought online traffic outside of those cities,” he told the Post. “But [McClatchy] decided not to.
They emphasized local news, and that is causing their demise.”
In November, McClatchy reported a net loss of $305 million on $7 million of income, the majority of which was from a massive markdown of its assets. As of September, the company’s outstanding debt stood at $708.5 million. But there are signs of growth, with the company seeing a 45 percent jump in digital-only subscribers in the past year.
McClatchy was founded in 1857 and had remained in the McClatchy family until Thursday’s bankruptcy filing. Although the company grew over the decades and, by 2004, had achieved 20 straight years of circulation increases, it was not immune to the financial crisis or the rise of the internet. According to McClatchy, it fought the bankruptcy filing for years and worked to find other solutions to keep it afloat. A retirement security plan approved by Congress in December did not extend to McClatchy or its similarly sized competitors.
