Chatham Asset Management, the New Jersey hedge fund that is McClatchy Co.’s largest creditor, has won an auction to buy the bankrupt local-news company, which owns Mahoning Matters.
Under the proposed deal that will be submitted to the bankruptcy court for approval, Chatham would buy the entire company, McClatchy said Sunday.
“As long-standing supportive investors in McClatchy, we are pleased with the outcome of the auction,” Chatham said in a statement. “Chatham is committed to preserving newsroom jobs and independent journalism that serve and inform local communities during this important time.”
The auction was Friday, after a federal judge rejected a last-minute challenge by a second hedge fund, Alden Capital Group, to Chatham’s starting bid.
Chatham was the only bidder publicly identified until Alden filed its challenge in court late Wednesday. McClatchy has said that more than 20 parties expressed initial interest in the company and that “multiple bidders” submitted binding bids by the July 1 deadline.
The company has declined to identify bidders or to provide details about the bids, citing non-disclosure agreements. In an earlier court filing that effectively served as a floor to open the bidding, Chatham had offered to acquire McClatchy for about $300 million, a combination of debt credits and at least $30 million in cash.
Alden alleged that some of McClatchy’s unsecured, or less protected, debt might be included in Chatham’s deal and that it was improper because bankruptcy Judge Michael E. Wiles has signaled that the issuance of the unsecured debt in 2018 could be open to litigation. But Wiles rejected the challenge, clearing the way for the auction to proceed.
Chatham and McClatchy are finalizing terms of the deal, known as an asset purchase agreement, which must be approved by McClatchy’s board of directors before the company notifies the bankruptcy court of a successful bid.
McClatchy said it plans to make that notification by Wednesday.
Wiles, who is presiding over McClatchy’s case in the U.S. Bankruptcy Court for the Southern District of New York, is scheduled to confirm the winning bid at a hearing July 24.
“From the outset of this voluntary Chapter 11 filing, our aim was to permanently address both the company’s legacy debt and pension obligations and strengthen our balance sheet in order to provide greater certainty and stability to the wider group of our colleagues and stakeholders who benefit from a restructured McClatchy,” Craig Forman, president and CEO of McClatchy, said in a statement Sunday.
“We’re pleased that Chatham and the supportive secured first-lien creditors believe in our business and our mission and are helping to achieve these goals.”
When McClatchy, the nation’s second largest local-news company, filed for Chapter 11 bankruptcy in February, its restructuring plan called for Chatham, which has been an investor since 2009, to emerge as owner. The company, whose stock had been publicly traded, would be under private ownership.
After the pandemic disrupted the economy in March, McClatchy added a second exit option, putting itself up for sale.
Chatham is the majority owner of Canada’s largest news chain, Ottawa-based Postmedia Network Canada Corp., and also owns American Media, publisher of the National Enquirer.
Alden, based in New York, took ownership of bankrupt MediaNews Group, whose flagship title is the Denver Post, about a decade ago. It also owns about a third of Tribune Co., which twice discussed merging with McClatchy before the bankruptcy filing.
McClatchy said it was forced into bankruptcy by the twin burden of debt from the 2006 purchase of Knight Ridder and legacy pension obligations.
Wiles had been scheduled to hold a hearing this week on McClatchy’s request for approval of a distressed termination of its pension program, but that has been pushed back to Aug. 26.
The federal Pension Benefit Guaranty Corporation, which takes over pensions of distressed companies, would assume McClatchy’s qualified pension plan. McClatchy would transfer roughly $1.4 billion in assets.
McClatchy was controlled by the McClatchy family for 163 years. The company owns 30 media titles in 14 states and Washington, D.C., including the Miami Herald, the Kansas City Star, the Sacramento Bee, the Charlotte Observer, the (Raleigh) News & Observer and the Fort Worth Star-Telegram.
– Kevin G. Hall is Chief Economics Correspondent for McClatchy.