You may recall a sidelight to McClatchy’s march to bankruptcy in early 2020. The company started the year by abruptly revoking supplemental executive pension bonuses it had been paying top-level retirees.
Naturally, the affected former executives were not happy. They hired lawyers and fought back. They got a seat on the creditors’ committee as the bankruptcy reorganization wound its way through federal court.
Bankruptcy proceedings were completed. The company was sold in August to hedge fund Chatham Asset Management, which outbid the omnipresent Alden Global Capital. The retired executives got assigned to a long line of vendors who were promised at least something back.
Six months later, how has that been working for them?
One old-time editor who is still active in the business and asked not to be quoted by name put it this way in an email:
“My wife and daughter this week both asked me about the billions of dollars that we are expecting. I have heard nothing. My understanding is that the money, if it even exists, would come from some huge tax windfall that Chatham might have received as a result of the purchase. The last I read, that windfall would amount to four cents on the dollar, if that. I have told my wife and daughter not to spend that four cents.”
Oddities leapt up when the payments stopped on Jan. 1, 2020. No notice, no explanation. Some of the shocked retirees even said that one of the regular payments that had come like clockwork for years had hit their bank accounts and then were mysteriously pulled back.
As best could be inferred, McClatchy decided in the runup to filing for bankruptcy reorganization that these nonguaranteed payouts would not fly as a continuing cost of doing business, especially against other continuing costs such as paying current employees.
Some, me included, scoffed at the boo-hoo hardship for the likes of former Knight-Ridder CEO Tony Ridder or former McClatchy CEO Gary Pruitt, who had moved on in 2012 to another seven-figure job running The Associated Press. (Knight-Ridder’s plan got lumped with McClatchy’s when the latter bought the former in 2006.)
Ridder, now 79, stood to get back an estimated $5.3 million over the rest of his life; Pruitt, considerably younger at 64, $14.5 million.
Ridder turned up as the leader of the group of roughly 600 trying to reinstate the payments. He alerted me to another side of the story. Those cut off included some widows in their 80s.
McClatchy management may or may not have known about the widows. In practice, they didn’t care. Finance had become king, and Chatham and other lenders wanted to see any unnecessary commitments trimmed.
Other younger retirees conceded that they could take the financial hit and hardly qualified as hardship cases. Losing the big supplemental bonuses nonetheless wreaked havoc, they said, with their retirement financial planning.
Tom Fiedler, former editor of the Miami Herald and dean of Boston University’s journalism school, explained:
“For many of us, these benefits go directly to our ability to maintain a retirement that would be considered modest for retirees of almost any other industry. Speaking for myself, the promise of a retirement income that included this added pension benefit came after 35 years at the Miami Herald and for my last eight years as a fairly paid senior editor at the end of the so-called golden era.
“Generous bonuses were going or gone by 2000, just as I was moving into the senior ranks. I appreciate McClatchy’s sincere efforts to save its newspapers and am heartbroken to see the dire situation it (and most other news organizations) face. I know cuts must be made and I don’t exempt myself from sharing the sacrifice. But sharing the sacrifice and being the sacrifice are very different things …
“I can assure you that it’s quite sobering to suddenly find at my age (74) that the retirement income my wife and I are counting on has been cut nearly a third. And to add insult to that injury, McClatchy now dismisses me and others in my situation as ‘highly compensated individuals.’ The clear implication is that we are imagined to have tucked away piles of excess money that we hardly need, whether we worked hard for it or not.
“According to McClatchy’s actuaries in this case, I am expected to live another 13 years and, under the previous ‘generous’ plan, would collect about $500,000, or about $36,000 each year. Yes, that amount of money has enabled our family to enjoy some nice things we otherwise wouldn’t have. But now — again, without any notice — we are faced with cutting our household budget by that same amount and it has been a strain.”
I asked McClatchy for a comment. The editor who asked not to be quoted by name had it right, they confirmed. Nothing has been paid yet. Nor has it been determined how much will be. It depends on a complex formula related to Chatham’s future tax refunds.
Pressed for a more detailed response, a McClatchy’s spokesperson referred me to a 288-page Securities and Exchange Commission filing. That was all the company cared to say, she said.
She pointed me to a section labeled General Unsecured Claims. What appears to be the relevant passage reads as follows:
“Pursuant to Bankruptcy Rule 9019, in satisfaction and in exchange for the Allowed Class 5 Claims, on the Effective Date each Holder of an Allowed Class 5 Claim shall receive its Pro Rata share of GUC Recovery Trust Interests (entitling such Holder to 20-10418-mew Doc 867 Filed 09/21/20 Entered 09/21/20 21:22:54 Main Document Pg 39 of 268 32 a Pro Rata share of the GUC Recovery Trust Assets in accordance with the GUC Recovery Trust Agreement.”
The editor’s rejoinder:
“Talk about knowing how to turn a phrase.”
