The publisher of the Sacramento Bee, Miami Herald, Kansas City Star and dozens of other newspapers across the country filed for bankruptcy protection Thursday.
McClatchy Co.'s 30 newsrooms, including, in North Carolina, the Charlotte Observer and News and Observer in Raleigh; and the Star-Telegram in Fort Worth, will continue to operate as usual as the publisher reorganizes under Chapter 11 bankruptcy protection.
The publisher’s origins date to 1857 when it first began publishing a four-page paper in Sacramento, following the California Gold Rush. That paper became the Sacramento Bee. Its other California papers are the Fresno Bee, Modesto Bee, Merced Sun-Star and San Luis Obispo Tribune.
McClatchy has received $50 million worth of debtor-in-possession financing from Encina Business Credit. That, combined with normal operating cash flows, will provide enough cash for the company, still based in Sacramento, to continue to function.
“When local media suffers in the face of industry challenges, communities suffer: polarization grows, civic connections fray and borrowing costs rise for local governments,” Chief Executive Craig Forman said. “We are moving with speed and focus to benefit all our stakeholders and our communities.”
McClatchy expects fourth-quarter revenue of $183.9 million, down 14% from a year earlier. Its 2019 revenue is anticipated to be down 12.1% from the previous year. That would mean the publisher’s revenue will have slid for six consecutive years.
The company expects to pull its listing from the New York Stock Exchange as a publicly traded company and go private.
McClatchy filed for bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York. Its restructuring plan needs approval from its secured lenders, bondholders and the Pension Benefit Guaranty Corp.
McClatchy has suffered as readers give up traditional subscriptions and get news online. Like other publishers, it has tried to follow them there.
Digital-only subscriptions have increased almost 50% year over year, McClatchy said, and subscriptions are now roughly evenly balanced between total audience and advertising revenue, with digital accounting for 40% of that revenue and growing. The company has more than 200,000 digital-only subscribers and more than 500,000 paid digital customer relationships.
“McClatchy remains a strong operating company with an enduring commitment to independent journalism that spans five generations of my family,” said Chairman Kevin McClatchy, the great-great grandson of company founder James McClatchy.
The company has also worked on its financials, trimming operating expenses by $186.9 million for the three-year period that ended in December. It also paid off about $153.5 million in debt in the same period.
Forman said McClatchy doesn’t anticipate any adverse effect on qualified pension benefits for substantially all of the plan’s participants and beneficiaries.