McClatchy Co., the nation’s second-largest local newspaper company, has filed for Chapter 11 bankruptcy in the face of “secular industry headwinds that have battered newspaper advertising revenues.” The company has launched negotiations with the Pension Benefit Guaranty Corporation (PBGC) and its largest secured creditor to fulfill the needs of its pension obligations and capital structure.
“[McClatchy] will seek the bankruptcy court’s authority to terminate its qualified pension plan, and appoint PBGC as the plan’s trustee,” the company said in a statement. “PBGC would continue to pay the company’s qualified pension plan participants their benefits.”
Beneficiaries under McClatchy’s current pension plan need not worry, the company asserted in its statement, as the PBGC will receive assistance from the company in the form of $3.3 million annually for a decade and 3% equity ownership of the company.
The PBGC rebuked, asking for “materially” larger fixed sums of income from the company over the course of the agreed-upon time period, as well as vying for more equity from the company.
Under the restructuring agreement, the company’s existing second and third lien term loans will be extinguished in exchange for 97% of the equity ownership of the company, according to the company’s press release.
“McClatchy’s plan provides a resolution to legacy debt and pension obligations while maximizing outcomes for customers and other stakeholders,” said Craig Forman, McClatchy’s president and CEO. “We expect there will be no adverse impact on qualified pension benefits for substantially all of the plan’s participants and beneficiaries.”
The company’s stock peaked in April 2014 at a $48.63 valuation. As of press time, the stock is valued at $0.35 per share. “The company’s existing equity will be cancelled,” the company said. McClatchy expects total revenues in the fourth quarter to be $183.9 million, down 14.0% from the fourth quarter of 2018.
Sears reached a similar agreement with the PBGC last year.
Media representatives from McClatchy did not respond to calls by press time.
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