McClatchy has begun a voluntary restructuring under Chapter 11 of the U.S. Bankruptcy Code following the solicitation of a plan of reorganization among its key stakeholders.
The Chapter 11 filing provides immediate protection to the company, which will continue to operate in the ordinary course of business as it pursues approval of the restructuring plan with its secured lenders, bondholders, and the Pension Benefit Guaranty Corporation (PBGC).
McClatchy and each of its 53 wholly owned subsidiaries filed their voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of New York. During the case, McClatchy and its 30 local newsrooms are operating as usual.
The company has obtained new $50 million debtor-in-possession financing from Encina Business Credit which, coupled with McClatchy’s normal operating cash flows, provides ample liquidity for Sacramento-based McClatchy and all of its local news outlets to operate as usual and fulfill ongoing commitments to stakeholders. The company aims to emerge from this process in the next few months.
“McClatchy’s Plan provides a resolution to legacy debt and pension obligations while maximizing outcomes for customers and other stakeholders,” said Craig Forman, president and chief executive officer. “When local media suffers in the face of industry challenges, communities suffer: polarization grows, civic connections fray and borrowing costs rise for local governments. We are moving with speed and focus to benefit all our stakeholders and our communities.”
McClatchy 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% year over year, and is now roughly evenly balanced between total audience and advertising revenues, with digital accounting for 40% of those revenues and growing, a much healthier distribution for an increasingly digital era. The company has more than 200,000 digital-only subscribers and well over 500,000 paid digital customer relationships.
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.
McClatchy has advised the NYSE American of the filing. Since the company does not anticipate emerging as a public company, but rather as a private company, it expects the NYSE American and the Company will begin the process to remove its listing from the exchange.
McClatchy is advised in this process by Skadden, Arps, Slate, Meagher & Flom, the Groom Law Group, and Togut, Segal and Segal as legal advisors and Evercore Group and FTI Consulting as financial advisors.
Sacramento, CA-based McClatchy publishes iconic local brands including the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The (Raleigh) News & Observer, and the Fort Worth Star-Telegram.