Owner of Lexington Herald-Leader files for bankruptcy protection

  • Owner of Lexington Herald-Leader files for bankruptcy protection

Owner of Lexington Herald-Leader files for bankruptcy protection

McClatchy, America's second-largest newspaper company, has filed for Chapter 11 bankruptcy, the company's DC Bureau reported Thursday.

The move will end family control of the company and turn it over to creditors who have expressed support for independent journalism, according to a report by McClatchy's Washington office. It also paid off about $153.5 million in debt in the same period.

"Publicly available information regarding the 2018 Transaction raises serious concerns about whether fraudulent transfers may have occurred, or whether CAM's (Chatham's) claims should be partially or completely subordinated", said the filing from Joseph K. Grekin, a lawyer with Schafer and Weiner, which is serving as outside counsel for the PBGC.

GateHouse Media, which merged with Gannett in November to become the largest American newspaper chain, is managed by the private equity firm Fortress Investment Group and buoyed by a $1.8 billion loan from Apollo Global Management.

On Thursday, as news broke about the McClatchy's bankruptcy, our reporters were covering the funeral of a slain Florida Highway Patrol trooper, a proposal by State College of Florida that promises to bring big changes to Parrish and a story about why this weekend's Cortez Fishing Festival is such an important event.

This reorganization is not unprecedented among newspaper companies. The publisher of The Philadelphia Inquirer and Philadelphia Daily News emerged from bankruptcy protection in 2010, Chicago Tribune and The Baltimore Sun publisher Tribune Co.in 2012 and GateHouse in 2013. "McClatchy's problems are very typical for those of local newspapers", he said, as the industry deals with an old business model that's deteriorating faster than digital and other new revenues are increasing.

Having already seen its revenue decline for five consecutive years, McClatchy's 2019 revenue is expected to decrease 12.1 percent from its 2018 earnings.

Digital-only subscriptions have increased nearly 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.

Yet the migration to digital publications has not offset the loss of advertisers that once relied on newspapers.

"It's not because of how they cover or don't cover national news, it's not because of what the president says about them, it's because Google and Facebook and Craigslist have taken all their advertising away", he said. The company said that for 2019, ad revenue fell 19%, while circulation revenue dropped 5%. "Under a plan outlined in its filing to a federal bankruptcy court, about 60 percent of its debt would be eliminated as the news organization tries to reposition for a digital future", according to the website.

To executives of McClatchy, Thursday's bankruptcy of the second largest newspaper chain in the United States is the fault of its pensioners, who outnumber current employees by a margin of 10 to one.

Last September, the New York Stock Exchange placed the company on notice that if it did not reverse its declining stock price, it would be delisted. Chatham also is the majority shareholder of Canadian newspaper chain Postmedia and owns National Enquirer publisher American Media Inc.