The McClatchy Company, long a major player in U.S. legacy media, may have to file for bankruptcy soon due to massive debt and large, unfunded pension obligations, according to reports.
McClatchy operates 29 newspapers, including The Miami Herald, The Charlotte Observer, The Kansas City Star, The Fresno Bee, The Kansas City Star, and The News and Observer (Raleigh, North Carolina).
In a sign of the times, McClatchy announced Nov. 13 that it would stop printing Saturday edition newspapers next year.
Although the company’s pension plan now has more than $1.32 billion in assets, Forman said, it remains underfunded by about $535 million. The IRS requires McClatchy to make a minimum contribution of $124 million next year. But Forman said the company doesn’t expect to have the required cash balances to do so.
Gloomy Forecasts
“If they can’t offload the pensions or get pension plan relief, they’ll have to file for bankruptcy,” media analyst Craig Huber, founder of Huber Research Partners LLC, told Bloomberg News. Huber said McClatchy would likely fall well short next year of what it needs to take care of its pension commitments.S&P Global Ratings also warned last week that McClatchy won’t have enough money next year to pay its bills.
“It could engage in a distressed debt exchange or file for Chapter 11 bankruptcy before September 2020, when the bulk of its mandatory pension contributions are due,” wrote S&P analysts Thomas Hartman and Vishal Merani in a report.
Looking for Help
McClatchy is in talks with the Pension Benefit Guaranty Corp., a federal government agency that insures corporate pension plan benefits like McClatchy’s.“We also continue to believe that a legislative solution to the challenge could provide debt relief to our business and reassurance to our pension plan participants,” Forman said in the video. “We are working tirelessly with members of Congress in an attempt to obtain such relief.”
A 162-Year Legacy
The company was established in 1857 “when James McClatchy helped launch the company’s first newspaper in the wake of the California Gold Rush,” according to the McClatchy corporate website. Its publications have won more than 50 Pulitzer Prizes.McClatchy stock has decreased as its financial position has steadily deteriorated. It was trading at $0.34 at market close Nov. 21, compared to $2.87 a month ago, and $6.90 a year ago.
Though McClatchy reports its digital subscriptions have been increasing steadily, this hasn’t significantly improved the outlook of the company.