The New Year brought a new chapter Thursday in the continuing saga of McClatchy Co.’s financial distress, as it froze a scheduled pension plan payment to retired executives.
The benefit was “unqualified” and therefore not part of the obligation to a much larger qualified plan that covers 24,000 employees and retirees. McClatchy announced in November that it would not be able to make the required 2020 payments to the qualified plan and had asked its federal insurer, the Pension Benefit Guaranty Corp., to assume the responsibilities of the plan. Negotiations in that arrangement are ongoing.
A former editor tipped me off, and three others confirmed this scenario: The scheduled first-of-the-year payment hit their bank accounts and shortly after was withdrawn. Requests from the pensioners for an explanation bounced to a consulting firm that would only say such payments have been frozen.
McClatchy treasurer Elaine Lintecum confirmed to me Thursday that the payments were cancelled. “The decision not to pay was not taken lightly,” she said in an interview. But continuing the extra payout for the presumably hundreds (an exact number of pensioners was not given) of once-highly paid executives would be viewed negatively by the federal insurer as terms of the possible takeover are being negotiated, she said.
The action does not mean a bankruptcy filing is imminent, Lintecum said, nor that the company’s ability to meet other obligations and continue operations has worsened.
McClatchy, with 30 regional newspapers including markets like Miami, Kansas City and Sacramento, has experienced worsening financial troubles for more than a decade.
Fifteen months ago I reported that a hedge fund, Chatham Asset Management, was both the company’s main lender and its biggest shareholder — thus gaining considerable sway in management.
McClatchy had reported that pension fund payments were among its debt challenges. After the November announcement that it was seeking the takeover by the insurer, already battered McClatchy shares lost more than half their value in one day.
In previous newspaper company bankruptcies (should deteriorating financial conditions lead to that) shareholders typically lose everything, but the properties continue publishing. Other creditors settle for partial payment, and the company, often as part of a sale, can start over in reorganization.
The executive retirees, some with careers at Knight-Ridder before it was acquired by McClatchy in 2006, were well paid while active and are unlikely to be left destitute. But several told me they have counted on the payments as part of retirement planning. And they were angry at the abrupt and odd way the withdrawal unfolded.
Lintecum declined to comment on why the group was not informed by some kind of notice.
There has been speculation for more than a year that McClatchy might merge with Tribune Publishing. But it is unclear who, if anyone, would finance such a transaction.
Rick Edmonds is Poynter’s media business analyst. He can be reached at firstname.lastname@example.org.