On February 13, McClatchy filed for Chapter 11 bankruptcy. Reasons for this move include an alarming amount of layoffs over the last decade, not being qualified to contribute $1.4 billion as part of a pension plan for the company’s retirees and employees which are over 24,000 in number in 2020, and very low revenue compared to when the company was at its peak.
Around the beginning of July, the company was put up for auction under the orders of a Manhattan US Bankruptcy court. The winner, Chatham Asset Management, was announced to the court on July 15 by heir Kevin McClatchy and Craig Forman — the leaders of the company.
The company’s 30 newspapers functioned as usual throughout the case proceedings. The Kansas City Star, the Sacramento Bee, and the Miami Herald are among the 30 newspapers in operation.
As of April 2020, the Federal Pension Benefit Guaranty Corporation was recommended to take control of the pension plan that the company was struggling to contribute toward. Chatham Asset Management stepped forward to pay off McClatchy’s $263 million debt in exchange for its full ownership passed over to them.
Among other interested companies, Chatham had placed a bid over the company in April. The bankruptcy scheme also plans to lay off more of the company’s staff up until 2022.
The owner of the Chicago-based Chatham Asset Management is Anthony Melchiorre. In 2002, he set up his hedge fund. Chatham is known to assist troubled businesses that still earn good revenue by taking up their debts, including American Media and now McClatchy.
Chatham, aside from owning American Media, is also a significant shareholder in Post Media, which is known to publish newspapers in Canada — namely the Montreal Gazette, Ottawa Citizen, and the National Post.
McClatchy fell into a debt of $2 billion in 2006, after the company acquired its significantly stronger competitor, Knight Ridder, for $4.5 billion. From then on, the company’s working population sank from 15,000 to approximately 3,300.
Before the events leading to the bankruptcy of the company, National Enquirer, the holding company of American Media, paid off the newspaper company in 2018 after becoming its stakeholder.
The propagation of technology led to people favoring reading from devices instead of print, as digital devices provided convenient access to the latest news via Google, Twitter, Facebook, and Instagram, among others. This has since resulted in a shift in the online ad market, with Facebook and Google taking full control.
According to research from the University of North Carolina, the distribution of physical newspapers in the US went from 122 million to 73 million between 2004 and 2019, ever since digital media entered the industry.
Despite the company having to auction itself off in the end, employees at McClatchy hold high hopes that the company is in good hands. Many believe that they are still a company that values journalism and makes it their duty to have good content produced.
About the Author
Luigi Wewege is the Senior Vice President, and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an Instructor at the FinTech School which provides online training courses on the latest technological and innovation developments within the financial services industry. Luigi is also the published author of: The Digital Banking Revolution.