Kansas City Star Parent Files For Bankruptcy Protection

Darnell Taylor
February 14, 2020

Today the Charlotte Observer's parent company, McClatchy Co., filed for Chapter 11 bankruptcy protection to seek relief from their mounting debt and liabilities.

The newspaper industry has been deeply hurt by changing technology that has sent the vast majority of people online in search of news. The company has obtained $50 million in financing from Encina Business Credit to maintain operations while it undergoes bankruptcy proceedings. We are privileged to serve the 30 communities across the country that together make McClatchy and are ever grateful to all of our stakeholders - subscribers, readers, advertisers, vendors, investors, and employees - who have enabled our legacy to date.

Earlier this year, McClatchy suspended some pension payments and announced it had hired a bankruptcy administrator to help it secure a government takeover of its retirement plan. Its 2019 revenue is anticipated to slide 12.1% from the previous year.

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. The bankruptcy process is expected to end McClatchy family control of the company, which has existed since the company's founding in 1857.

The company's $1.4 billion pension plan is also expected to be transferred to the US government's Pension Benefit Guaranty Corp.

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. Fifteen years ago, the company's stock price was more than $700.

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The estimated total USA daily newspaper circulation including both print and digital in 2018 fell 8% from the prior year to 28.6 million for weekday.

Relentless cost-cutting ensued, almost halving the sector's workforce - from 71,000 in 2008 to 38,000 in 2018, according to Pew Research Center.

Last year, New York Times Executive Editor Dean Baquet made a dire prediction that a number of local newspapers will die in the "next five years". The Washington Post and Los Angeles Times, both national publications, are thriving after being bought by billionaires. The Boston Globe, Minneapolis Star-Tribune and Las Vegas Review-Journal are among other major American newspapers that appear to have steadied themselves after being sold to local wealthy individuals.

But the arrival of moneyed interests can prove fleeting.

"While this is obviously a sad milestone after 163 years of family control, McClatchy remains a strong operating company and committed to essential local news and information", McClatchy Chair Kevin McClatchy said during an announcement of the news.

McClatchy's filing foreshadows further cost-cutting and retrenchment for one of the biggest players in local journalism, at a time when most USA newsrooms already are straining to cover their communities amid declining ad revenue and dwindling resources.

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