Mon, 24 Feb 2020

Pulitzer Prize-winning publisher plans restructure

Lola Evans
14 Feb 2020, 08:31 GMT+10

SACRAMENTO, California - McClatchy newspapers on Thursday filed for bankruptcy in an attempt to restructure its business.

The company's first newspaper was launched 163 years ago this month, on February 3, 1857, by James McClatchy. Known then as The Daily Bee, that paper is today The Sacramento Bee.

Today McClatchy operates 30 media companies, including twenty-nine daily newspapers, in 14 states, publishing, among others, The Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The (Raleigh) News & Observer, and the Fort Worth Star-Telegram. The company acquired Knight Ridder in 2006 which was then the second largest newspaper publisher in the United States paying $4.4 billion in cash and stock. The timing could not have been worst as it was then that readership subscriptions, and in consequence advertising revenue, began declining.

The Chapter 11 filing will have no impact on the Sacramento-headquartered company's operations, including its 30 local newsrooms, which will continue to operate as normal.

McClatchy, which is listed on the New York Stock Exchange, says it has obtained a new $50 million debtor-in-possession financing from Encina Business Credit which, coupled with the company's normal operating cash flows, provides ample liquidity for to operate as usual and fulfill ongoing commitments to stakeholders. The company says it aims to emerge from this process in the next few months.

"McClatchy remains a strong operating company with an enduring commitment to independent journalism that spans five generations of my family,'' Kevin McClatchy, Chairman of McClatchy's Board of Directors and great-great grandson of the Company's founder, James McClatchy said Thursday. "This restructuring is a necessary and positive step forward for the business, and the entire Board of Directors has made great efforts to ensure the company is able to operate as usual throughout this process. We are privileged to serve the 30 communities across the country that together make McClatchy and are ever grateful to all of our stakeholders subscribers, readers, advertisers, vendors, investors, and employees who have enabled our legacy to date. We look forward to the continued success of such an outstanding group of colleagues long into the future."

McClatchy says it has made significant progress in its digital transformation in the past three years. As the second-largest U.S. local newspaper company, McClatchy has grown its digital-only subscriptions by almost 50 percent year over year, and is now roughly evenly balanced between total audience and advertising revenues, with digital accounting for 40 percent of those revenues and growing, a much healthier distribution for an increasingly digital era. The Company says it has more than 200,000 digital-only subscribers and well over 500,000 paid digital customer relationships.

"The media industry has been under tremendous pressure for years. Technological advances, consumer-behavior shifts, and business-model challenges are among the many disruptive forces affecting the media business," Craig Forman, the Chief Executive Officer of McClatchy said Thursday. "We believe the actions we have taken are an important step to ensure a strong future for McClatchy, and we look forward to emerging from this process in the next few months with a stronger financial foundation. At that time, we expect to be even better positioned to advance our digital transformation and continue delivering essential local news to our subscribers and readers in the communities we serve."

In the three years ended in December 2019, McClatchy has reduced its operating expenses by $186.9 million (or 23.3%) in its efforts to stabilize operating cash flow amid secular industry headwinds that have battered newspaper advertising revenues. This focus on cash flow has allowed the company to pay off roughly $153.5 million in debt in the same period, while also focusing remaining resources on its digital transformation and its journalism - earning two Pulitzer Prizes and many other awards, most recently for the Miami Herald's coverage of the Jeffrey Epstein scandal.

The assets of McClatchy's qualified pension plan are estimated at $1.393 billion as of the filing, including approximately $580 million of voluntary contributions made by McClatchy, substantially greater than the contributions required by law.

As is typical in Chapter 11 proceedings, McClatchy says it has filed customary first day motions that will allow it to maintain its employee wage and benefit programs, as well as commitments to the other stakeholder groups throughout this process. It is anticipated that go-forward trade creditors and other go-forward vendors that continue to do business with the Company will be unaffected by the Chapter 11 process, although it is possible that some payments due prior to the commencement of cases to certain go-forward trade creditors and vendors may be delayed. These delayed payments to go-forward trade creditors and vendors, the company said, are anticipated to be cured in full when the Company exits Chapter 11.

Major newspapers owned and operated by McClatchy include (courtesy of Wikipedia):

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