McClatchy says it has agreement with key creditors on procedure, timeline for potential sale
McClatchy Co. told a bankruptcy judge Monday that it has reached an agreement with less protected creditors on a timeline and process for putting the nation’s second-largest local news company up for sale.
The company expects to make the agreement official in a court filing this week, a company spokeswoman said.
Monday’s hearing included no details on terms of the agreement, and the company’s outside counsel did not respond to a request for further comment. McClatchy and its two largest creditors have said publicly and in court filings that the company is seeking a buyer for substantially all of its assets, which include 30 newsrooms in 14 states and Washington, D.C.
But the sales plan hit a bump last week, when Judge Michael E. Wiles ordered the company and a committee of its less protected creditors to reach agreement on the process.
The company’s two biggest lenders, the hedge funds Chatham Asset Management and Brigade Capital Management, had notified the court in mid-April that McClatchy was speaking with potential buyers and hoped to close on a deal by mid-July.
The two lenders together hold 79 percent of the most-protected debt, putting them at the front of the line to recover what they are owed.
But the mid-April filing prompted objections from the committee of less protected creditors, as well as the trustee serving as an independent watchdog in the case.
Although the sales process doesn’t require his blessing, Wiles must approve McClatchy’s exit from bankruptcy, including any sale, and he warned last week that failure to involve the court from the start was risky.
“I cannot say strongly enough how crazy that seems to me,” he said as he set a Monday deadline for the parties to reach an agreement on process, or risk having him decide. “Maybe you don’t trust what I will do with a sale process?”
The less protected, or “unsecured,” creditors fear that Chatham and Brigade stand to benefit most from any sale and will squash their interests. Representatives for Chatham and the unsecured creditors committee did not respond to a request for comment Monday.
McClatchy entered bankruptcy in February hoping for a quick exit, with a plan calling for Chatham to assume control of the company in exchange for extinguishing 55 percent of its debt.
But the slow pace of negotiations with less protected creditors coupled with the economic downturn brought by the coronavirus pandemic led to the accelerated sale process, the company has said.
The sale discussions are occurring in parallel with mediation talks between the company and the less protected creditors, aimed at reaching an agreement to restructure debt under the Chapter 11 process. Both sides said those talks have been slowed by an inability to meet face to face after the coronavirus pandemic shut down much of the country.
Twenty interested bidders have been examining the company’s finances, McClatchy’s lead outside counsel, Van C. Durrer II of Skadden, Arps, Slate, Meagher & Flom LLP, told Wiles last week.
Durrer also warned last week that potential anti-trust issues could delay completion of a sale, a sign that large media outlets are likely among those considering a bid for the company.
Executives have declined to discuss the potential buyers, citing non-disclosure agreements. But McClatchy has previously acknowledged that it twice tried unsuccessfully to merge with another chain, widely reported to be Tribune, before declaring bankruptcy in February.
After consolidations, only two other major chains remain in the industry: MediaNews, whose holdings include The Denver Post, and Gannett, which recently merged with GateHouse and is the nation’s largest.
A group of about 220 former executives from McClatchy and Knight Ridder, which McClatchy acquired in 2006, are among the less protected creditors in the case. They are seeking reinstatement of special supplemental pensions that the company terminated in January.
In another event related to the case, the trustee, Benjamin J. Higgins, on Thursday will hold a so-called 341 meeting, which allows creditors to question McClatchy representatives under oath about representations and documents.
Sacramento-based McClatchy operates newsrooms in 30 markets, including the Miami Herald, the Kansas City Star, the Sacramento Bee, the Charlotte Observer, the (Raleigh) News & Observer and the Fort Worth Star-Telegram. The company has been controlled by the McClatchy family since the time of the California Gold Rush.
This story was originally published May 4, 2020 at 4:54 PM with the headline "McClatchy says it has agreement with key creditors on procedure, timeline for potential sale."
