July 1, 2020

Inflection day for the future ownership of Tribune Publishing and McClatchy arrived Wednesday. As I thought might be the case, nothing definitive happened — but there were three developments of note:

Alden Global Capital, with a 32% stake and growing influence in the management of Tribune, could buy additional stock July 1 as a “standstill agreement” expired. Instead, The Wall Street Journal reported, Alden is seeking one more seat on the company’s board while agreeing not to buy up more shares for now.

According to the Journal, the seat would go to Alden co-founder Randall Smith. Alden already has two seats on the six-seat board (seven with his addition), so it would ratchet up control without needing to evaluate the company for acquisition in the midst of the pandemic and advertising downturn.

Securities law would require Tribune to promptly disclose such a change but no announcement had been forthcoming by late afternoon.

McClatchy, meanwhile, was planning to receive bids to buy the company out of Chapter 11 federal bankruptcy reorganization up until midnight. A spokesperson said that the company did not intend to reveal how many offers are received or for how much.

A schedule has been set, she added, to resolve ownership by the end of the month. “If multiple qualified bids are received, the court-supervised auction will be held on July 8. By July 15, we will notify the court of the successful bidder and on July 24, a hearing will be held to confirm the winning bid.”

Chatham Asset Management, which holds most of the company’s debt with one other fund, is assumed to be a bidder. Beyond that, it is unclear whether anyone else will want to take on McClatchy’s 30 papers given worsening revenue prospects — and, if so, will outbid Chatham.

The bankruptcy case continued in a three-hour virtual hearing devoted to airing a dispute between unsecured creditors on one side and McClatchy and Chatham on the other. The creditors include the Pension Benefit Guaranty Corporation, the federally chartered insurer that stands to take over a pension plan covering 24,000 McClatchy employees and retirees.

The PBGC and a broader committee of creditors, including some 600 executives who had been receiving a pension supplement until it was discontinued early this year, alleged that McClatchy and Chatham engaged in a “fraudulent transfer” in refinancing debt in mid-2018.

In essence, the claim is that the company was already insolvent at the time, and both two parties knew that.

Judge Michael Wiles did not rule on whether a full trial on the dispute could go forward. But his questions indicated sympathy for the charges. “How were (the company and the individual newspapers) not insolvent?” he asked. “This is very troubling to me.”

A McClatchy lawyer argued that, at the time, the company was pursuing a transformation plan that would allow it “to participate in the digital age in which we find ourselves.”

But, he conceded, “a bunch of things overtook us.” In particular, the company had thought federal relief deferring or reducing its pension payment obligations would be forthcoming. That never happened.

Wiles said that he wanted to be briefed Monday in a confidential conference on the bids before issuing an order. He added that he was unlikely to give either side just what they were asking — essentially giving them a nudge to settle themselves.

Rick Edmonds is Poynter’s media business analyst. He can be reached at redmonds@poynter.org.

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This article has been updated to remove an erroneous number provided by a McClatchy lawyer. 

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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