New Jersey-based hedge fund Chatham Capital Management submitted the winning bid for the McClatchy Co., five months after the publisher of the Miami Herald, Kansas City Star and more than two dozen other newspapers filed for bankruptcy.
The companies did not put a price on the deal announced Sunday, which comes after a judge rejected a last-minute challenge by another hedge fund. But in an earlier filing, Chatham offered roughly $300 million in a combination of restructured debt and at least $30 million in cash.
The plan is subject to bankruptcy-court approval; a hearing is set for July 24.
McClatchy, which owned the Star Tribune from 1998 until 2006, has been hobbled by debt and pension obligations. It filed for Chapter 11 protection in February. Under the restructuring plan submitted to U.S. Bankruptcy Court in the Southern District of New York, Chatham, its largest investor outside of the McClatchy family, would emerge as the sole owner and take the company private.
The publisher has said it received interest from more than 20 companies, but could provide no details about any of the bids after Judge Michael E. Wiles ordered them sealed.
Competing hedge fund Alden Global Capital filed an emergency motion to delay the bankruptcy auction, but the bid was denied. Its media business, run under the name Digital First Media, owns 98 newspapers, including the Denver Post, San Jose Mercury News and St. Paul Pioneer Press.
But even before the coronavirus recession took hold, local publishers had long struggled with online business models and dozens of papers were snapped up by private-equity firms —including Alden and GateHouse Media, which now owns Gannett — that pursued profitability through steep retrenchments.
Chatham in a statement said it was "pleased with the outcome of the auction" and that it was "committed to preserving newsroom jobs and independent journalism that serve and inform local communities during this important time."
"From the outset of this voluntary Chapter 11 filing, our aim was to permanently address both the company's legacy debt and pension obligations and strengthen our balance sheet in order to provide greater certainty and stability to the wider group of our colleagues and stakeholders who benefit from a restructured McClatchy," McClatchy President and Chief Executive Craig Forman said in a statement. "We're pleased that Chatham and the supportive secured first-lien creditors believe in our business and our mission and are helping to achieve these goals. Local journalism has never been more vital and we remain steadfast in our commitment to delivering on our mission and continuing to serve our communities."
McClatchy has attributed much of its financial problems to its 2004 acquisition of Knight Ridder for $4.5 billion. McClatchy had historically focused on local news coverage and Knight Ridder had a much larger national footprint.
But the deal came as readers were accelerating their migration to online news outlets, then dovetailed with the Great Recession hit. McClatchy again doubled down on local news coverage instead of national and international stories, the strategies that have led the New York Times and Washington Post to better financial outcomes.
Earlier this year, McClatchy suspended some pension payments and announced it had hired a bankruptcy administrator to help it secure a government takeover of its retirement plan. In November, the publisher said it would not be able to make a required $124 million payment to the fund, which, as of March 2019, was underfunded by $535 million.