Newspaper chain McClatchy, owner of publications such as the Miami Herald and Kansas City Star, filed for Chapter 11 bankruptcy protection Thursday after grappling with a pension crisis and the news industry's financial challenges.
The Sacramento, California-based company, whose 30 newsrooms also include the Fort Worth Star-Telegram and The Charlotte Observer, proposed a deal to transfer ownership to one of its lenders and its largest shareholder, hedge fund Chatham Asset Management, and other lenders.
As part of the deal, the McClatchy family is expected to give up control of the company after more than 160 years.
"McClatchy remains a strong operating company with an enduring commitment to independent journalism that spans five generations of my family,'' Kevin McClatchy, chairman of McClatchy's Board of Directors and great-great grandson of the company's founder, James McClatchy, said in a statement.
"This restructuring is a necessary and positive step forward for the business, and the entire Board of Directors has made great efforts to ensure the company is able to operate as usual throughout this process."
The newspaper chain also said it expects to transfer management of its $1.4 billion pension plan to the U.S. government's Pension Benefit Guaranty Corp. The costs of the company's pension plan, a legacy of an era in which the newspaper industry was rich with profits, weighed it down in recent years.
Although bankruptcies can result in pensioners receiving less than they were due, McClatchy said Thursday that it believes its plan "would not have an adverse impact on qualified pension benefits for substantially all plan participants."
In a court filing, McClatchy listed the PBGC as its largest unsecured creditor with a claim of $530 million. The PBGC and a federal judge would have to sign off on the company's pension plan and sale.
Statement from PBGC on McClatchy bankruptcy filing:
“PBGC and McClatchy continue to engage in discussions to find the best path forward for the people covered under the company’s pension plan, as well as the millions of people in the other plans PBGC insures. As always, our goal is to protect the retirement security of workers and retirees," the PBGC said in a statement.
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McClatchy's pension plan was founded in 1944 and covered nearly 24,500 people as of Jan. 1, 2019. The company also assumed other pension plans with various acquisitions in recent decades. By July 2019, the company's pension shortfall totaled $805 million, according to a court filing.
Hopes of last-minute relief were dashed in late 2019 when the Internal Revenue Service declined the company's request to be covered under a federal act aimed at easing pension funding standards for community newspapers.
With total daily paid print circulation of 1.1 million and 55.7 million monthly unique visitors, the company remains a major force in local journalism. For example, the Herald played a key role in exposing disgraced financier Jeffrey Epstein's alleged ring of sexual abuse.
Since McClatchy's 2006 acquisition of newspaper chain Knight-Ridder, which was purchased with $5 billion in debt, the company has been suffering from the same factors that are affecting traditional news media companies.
From 2006 to 2018, the company's advertising revenue and circulation revenue declined 80% and 59%, respectively, according to a court filing.
McClatchy has slashed costs and paid off debt in recent years in a bid to halt its downward spiral. The company has gone from more than 15,000 employees in 2006 to fewer than 3,000 in 2019, according to a court filing.
Competitors, including USA TODAY owner Gannett, have faced similar hurdles. In 2019, Gannett agreed to a sale to GateHouse owner New Media Investment Group in a deal that created the largest U.S. news company by print circulation and one of the largest by digital audience.
Bankruptcies often come with the risk of closures, asset sales and layoffs, if not outright liquidation.
McClatchy spokesperson Jeanne Segal said in an email that there would be "no layoffs associated with this filing. Our newsrooms are operating as usual, providing strong independent local journalism essential to the communities we serve."
Chatham told McClatchy in a statement that it's "committed to preserving independent journalism and newsroom jobs. We look forward to working with the company in the best interests of all stakeholders."
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
This article originally appeared on USA TODAY: McClatchy files Chapter 11 bankruptcy after pension woes