McClatchy (MNI) - Get Report, owner of such newspapers as the Miami Herald, the Kansas City Star and the Charlotte Observer, filed under Chapter 11 of federal bankruptcy law as it seeks approval of a restructuring plan.
The second-largest local-news company in America filed its petitions in U.S. Bankruptcy Court for the Southern District of New York.
During the case, the company said, McClatchy and its 30 local newsrooms are operating as usual.
Under a plan outlined in its filing, about 60% of the company's debt would be eliminated as the news organization tries to reposition for a digital future.
The Sacramento, Calif., company said in November that its principal debt outstanding as of Sept. 29 was $708.5 million.
McClatchy, which was founded in 1857, had warned that it might not be able to continue as a going concern due to a mandatory $124 million contribution to its pension plan in 2020.
McClatchy said in its third-quarter-earnings release that the payment created “a significant liquidity challenge.”
The company said it had been in active restructuring negotiations with the Pension Benefit Guaranty Corp. and its largest secured creditor to address the future of its pension obligations and capital structure.
The assets of McClatchy's qualified pension plan are estimated at $1.39 billion as of the filing.
Bloomberg reported that McClatchy signed an agreement with the PBGC that allowed it to skip a payment while talks to have the agency take over the plan continued.
The plan was underfunded by about $535 million, according to an accounting last year.
The likely new owners, if the court accepts the plan, would be led by hedge fund Chatham Asset Management of Chatham, N.J.
They would operate McClatchy as a privately held company and more than seven million shares of both publicly available and protected family-owned stock would be canceled.
The shares closed Wednesday up 9.4% at 75 cents.
The company said that it was finalizing the accounting for its fourth-quarter and full-year 2019 results and does not have an estimate of net income for the periods.
McClatchy estimates fourth-quarter revenue at $183.9 million, down 14% from the year-earlier period. Advertising revenue was $89.7 million and audience revenue was $80 million, the company estimated.
Full-year 2019 revenue is estimated at $709.5 million, down 12% from 2018, with $337.1 million in ad revenue and $321.8 million in audience revenue.