Journalists and other employees at McClatchy’s 30 newspapers appear to have dodged a bullet as the company is being sold to hedge fund Chatham Asset Management.
The other bidder for the company at bankruptcy auction was notorious cost-cutter Alden Global Capital. Alden would have cut roughly 1,000 of 2,800 jobs, the company said in a filing Friday that revealed more detail of the Chatham deal.
About a third of McClatchy’s employees are journalists, the company said.
Chatham has pledged to keep open all 30 papers, which include the Miami Herald and The Sacramento Bee. It will offer the existing workforce continued employment at their current base salaries, while also honoring collective bargaining contracts.
Alden was not guaranteeing any of that, according to McClatchy’s filing.
McClatchy had announced July 16 that Chatham’s bid would be accepted. The deal will not become final until approved by bankruptcy judge Michael Wiles at a hearing now scheduled for August 4. The sale could be completed by early September.
There were several other details in the filing and a company press release Friday evening.
Chatham’s bid was $312 million, slightly higher than the $300 million in initial estimates. The majority of that will be covered by converting debt McClatchy owed Chatham, its lead lender. Chatham will also assume some other liabilities, making a total transaction value of approximately $350 million.
Alden’s bid was valued at approximately $100 million less, according to the McClatchy filing.
CEO Craig Forman will leave his job once Chatham takes control. Forman, who took the position in January 2017, indicated that he plans to return to Silicon Valley where he was a tech executive and investor.
Still to be resolved are the claims of unsecured creditors, including a group of retired executives who had been receiving bonus payments on top of those in the company’s regular guaranteed pension plan.
The company has said it expects that plan, covering 24,000 current and retired employees, to transfer to its federal insurer, the Pension Benefit Guaranty Corporation. That transaction, too, is not yet completed.
McClatchy filed for Chapter 11 bankruptcy reorganization Feb. 20.
For years it had struggled to pay interest and principal on the large debt it took on to buy Knight Ridder in 2006.
Nonetheless the McClatchy family, who had voting control of the public company, had resisted the bankruptcy option. That became necessary, however, with a large contribution to the pension plan due this year and the company unable to get it deferred.
Family members and other shareholders will lose the value of their stock as the company becomes private under Chatham.
As the bankruptcy was being planned, it appeared McClatchy could be profitable on an operating basis once freed of its debt. But that was before the pandemic and a continuing deep advertising recession that is challenging finances throughout the industry.
Rick Edmonds is Poynter’s media business analyst. He can be reached at firstname.lastname@example.org.