The McClatchy Co., the second largest local news company in the U.S., filed for bankruptcy on Thursday.
The publisher of the Miami Herald, the Kansas City Star and dozens of other newspapers across the country obtained $50 million in debtor-in-possession financing which, coupled with its operating cash flows, provides enough liquidity for McClatchy and all its 30 local news outlets to operate as usual, the company said.
McClatchy Co.’s 30 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, the Associated Press reported.
The company, one of the largest newspaper publishers in the United States, had been burdened by heavy debt it took on when it bought newspaper chain Knight Ridder Inc. in 2006 in a $4.5 billion deal, Reuters reported.
McClatchy is also known to have large pension obligations that eat into its profits.
The newspaper industry has been devastated by changing technology that has sent the vast majority of people online in search of news. While McClatchy and others have pushed digital operations aggressively, advertising dollars have continued to flow toward internet giants like Facebook and Google, the AP said.
The move will end family control of the company and turn it over to creditors who have expressed support for independent journalism, according to a report by McClatchy’s Washington office.
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 (MNI) from the New York Stock Exchange as a publicly traded company, and go private.
Under the Chapter 11 filing, the company would be allowed to restructure its debts and rid itself of much of its pension obligations as it tries to reposition for a digital future.
Hedge fund Chatham Asset Management LLC would be the likely new owners if a court accepts the bankruptcy plan, according to the McClatchy report.
“While this is obviously a sad milestone after 163 years of family control, McClatchy remains a strong operating company and committed to essential local news and information,” said Kevin McClatchy, chairman of the company.
Material from Bloomberg, Reuters and the Associated Press has been used in this report.
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