McClatchy Co. (NYSEAMERICAN: MNI), the second-largest newspaper publisher in the U.S., has filed for Chapter 11 bankruptcy protection.
The Sacramento-based newspaper company announced on Thursday that it had started “voluntary restructuring” under the U.S. Bankruptcy Code. The Chapter 11 filing would provide immediate protection to the company.
McClatchy also said that they had obtained a $50 million debtor-in-possession financing from Encina Business Credit, which along with the company’s cash flows, would provide “ample liquidity” for all its news outlets to operate as usual.
Kevin McClatchy, chairman of the company’s board of directors, expressed optimism about McClatchy’s efforts to stay operational, saying that the restructuring was "a necessary and positive step forward for the business." He added, “The entire Board of Directors has made great efforts to ensure the company is able to operate as usual throughout this process.” He is the great-great-grandson of the company’s founder James McClatchy
Why It Matters
The publisher of the Sacramento Bee, The Miami Herald, and 28 other newspapers started off as a family business in 1857. The company went public in 1988. It now has plans to restructure $700 million in debt as well as its pension obligations.
The New York Times reported that the company would be delisted and operated by Chatham Asset Management. Chatham owns American Media, Inc., the publisher of multiple tabloids, and is already a major lender and shareholder in McClatchy.
The U.S. Newspaper industry is struggling to stay afloat as print advertising collapses, eliminating billion in revenue since 2006.
Charlie Munger, the vice-chairman of Berkshire Hathway Inc. (NYSE: BRK-A) recently remarked that newspapers are “dying.” The growth of social media is contributing to the death knell of traditional newspapers.
McClatchy shares traded 1.36% higher at $0.76 in the after-hours session on Thursday. The shares had closed the regular session 9.43% higher at $0.75.
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