Updated as of July 24, 2020
As you know, on February 13, 2020, McClatchy began a voluntary restructuring process under Chapter 11 of the U.S. Bankruptcy Code to strengthen our balance sheet and position us to accelerate our digital transformation.
On July 24, we announced that we filed an asset purchase agreement with the U.S. Bankruptcy Court, formalizing the details of Chatham Asset Management’s successful bid for ownership of McClatchy in the Chapter 11 sale process. Among other terms, the agreement outlines that the entirety of the 30 McClatchy news organizations will move seamlessly to the new ownership structure. In addition, all employees will be offered their current job with new McClatchy, with equivalent compensation, benefits, and full credit for service years. The agreement also provides that new McClatchy will honor all current collective bargaining agreements.
The filing is a key milestone in the reorganization process and an important step towards a resolution of our reorganization will provide greater certainty and stability to our employees and the wider group of stakeholders who benefit from a restructured McClatchy. While the auction has placed our important organization in the hands of a new owner, our mission remains the same: to provide essential news and information in the 30 communities across America that together make McClatchy.
We will continue to operate business as usual – with the same unwavering commitment to delivering strong, independent journalism that is essential to our local communities. There are no changes in your day-to-day work and responsibilities, or wages, salary, and benefits as a result of our Chapter 11 or sale process.
To be clear, our finances continue to be sufficient to fund McClatchy’s operations, even amid the extraordinary global circumstances we are all facing right now.
Our voluntary filing with the U.S. Bankruptcy Court protects stakeholders’ interests. As you know, on February 14, 2020, McClatchy was authorized to continue carrying out operating-as-usual measures such as payroll, health, dental, and vision insurance, and other ordinary course employment benefits like vacation/sick time and 401(k). During the period of this restructuring, credit card charges will be limited to travel-related expenses only.
We are committed to keeping you informed throughout this process here on our dedicated website, which is being regularly updated and includes information, FAQs, and resources to help you understand this process.
As always, I want to thank you for your exceptional work. You are the smartest, wisest, most thorough, and thoughtful colleagues working in local journalism, and I’m proud to count myself among the McClatchy team. You work every day to further our mission in the face of industry pressures and challenges and deliver credible and fearless coverage with an unwavering commitment to strong, independent journalism.
Many thanks for your patience as we work toward emergence and deepest gratitude for all of your hard work during a time of uncertainty.
Frequently Asked Questions
What is the significance of filing an asset purchase agreement with the Court?
The asset purchase agreement formalizes the details of Chatham’s successful bid for ownership of McClatchy in our Chapter 11 process and is a key step in the reorganization process. It paves the way for a change in control of our company. The agreement with Chatham provides for a resolution to our legacy debt and pension obligations and that will provide greater certainty to all colleagues and stakeholders who benefit from a restructured McClatchy.
Will employees experience any immediate changes as a result of the filing of the asset purchase agreement?
No, colleagues will not experience any immediate changes in their day-to-day roles as a result of this announcement. The APA outlines that the entirety of McClatchy will move seamlessly to the new ownership structure and that all employees will be offered their current job with new McClatchy, with equivalent compensation, benefits and full credit for service years (this must be negotiated for union-represented employees). The agreement also provides that new McClatchy will honor all current collective bargaining agreements. Terms and conditions for employees covered by such agreements will be negotiated with union representatives.
Looking ahead, as part of the transition from Chapter 11, our Chairman Kevin McClatchy, President and CEO Craig Forman, and fellow Board Directors have announced plans to depart from the company when the transaction closes by the end of the third quarter.
Does the asset purchase agreement being filed mean that the Chapter 11 process is complete?
Not yet, but this development brings us one step closer to transitioning out of Chapter 11 with McClatchy continuing as a viable going concern. We expect McClatchy to transition from Chapter 11 by the end of the third quarter under Chatham ownership, with a stronger balance sheet and in its entirety as one McClatchy, just as we entered the process in February.
Is Chatham our new owner as of July 24, 2020?
Not yet. We have certainly made progress in this process, with a vote of approval from our Board of Directors and the asset purchase agreement filed with the Court, but there are still several milestones ahead before we can officially call Chatham our new owner. Specifically, the agreement is subject to approval by the Court, which is currently scheduled for a hearing on August 4, 2020, as well as customary regulatory approvals and other closing conditions.
When do you anticipate McClatchy’s transition to new ownership to take place?
We are following the legal process established by the U.S. Bankruptcy Court. In accordance with Chapter 11 rules, the proposed asset purchase is scheduled for consideration by the Court for approval at a hearing on August 4. The agreement is also subject to customary regulatory approvals and other closing conditions. We expect to have an update on the regulatory approval process in the coming weeks, after which we will be well-positioned to transition from Chapter 11 under new ownership with a stronger balance sheet.
Will there be layoffs or changes to compensation or benefits programs when McClatchy transitions to Chatham ownership?
The asset purchase agreement outlines that the entirety of McClatchy will move seamlessly to the new ownership structure and that all employees will be offered their current job with new McClatchy, with equivalent compensation, benefits and full credit for service years (this must be negotiated for union-represented employees). The agreement also provides that new McClatchy will honor all current collective bargaining agreements. Terms and conditions for employees covered by such agreements will be negotiated with union representatives.
Will McClatchy’s transition to Chatham ownership affect our collective bargaining agreements?
Under the terms of the agreement, new McClatchy will honor all current collective bargaining agreements.
Will Chatham change McClatchy’s mission?
Chatham has been a lender and investor in McClatchy for a long time and is aligned with us in their commitment to continuing to deliver strong, independent local journalism to the communities that we serve. While the Chapter 11 process will place our organization in the hands of a new owner, our mission remains the same: to provide essential news and information in the 30 communities across America that together make McClatchy. As a demonstration of this dedication to our mission, under the terms of the agreement with Chatham, McClatchy will transition from Chapter 11, intact as one company, just as we entered it.
What will happen to the McClatchy brand?
Under the terms of the agreement, the entirety of the 30 McClatchy news organizations will move seamlessly to the new ownership structure. There are no changes to the McClatchy name or brand as a result of this announcement.
Does Chatham have any plans to eliminate certain publications?
Under the terms of the agreement, the entirety of the 30 McClatchy news organizations will move seamlessly to the new ownership structure.
Does Chatham have any plans to transition to online only?
While we cannot speak on behalf of Chatham, they have demonstrated a commitment to our mission and to delivering strong, independent local journalism to the communities that we serve. While the asset purchase agreement will place our important organization in the hands of a new owner, our mission remains the same: to provide essential news and information in the 30 communities across America that together make McClatchy – be it online or in print.
What is Chatham’s go-forward strategic plan for McClatchy?
While we cannot speak on behalf of Chatham, as a long-time lender and investor in McClatchy, they have demonstrated a commitment to our mission of delivering essential local journalism to the communities we serve.
Will a change in ownership impact PBGC’s assumption of McClatchy’s pension plan?
The change in ownership will not impact plans for the Pension Benefit Guaranty Corporation (PBGC) to take over McClatchy’s qualified pension plan – meaning, we continue to believe that PBGC will assume the assets and liabilities of the qualified pension plan and continue to pay benefits to the plan participants, subject to federal statutory limits, with no adverse impact for substantially all plan participants.
Will the Chapter 11 or ongoing sale process impact day-to-day operations? Will my role or responsibilities change as a result of the ongoing reorganization or sale process?
McClatchy and all 30 of our local newsrooms will continue to operate as usual. You should see no change in your day-to-day work or responsibilities as a result of this process.
Is my job safe? Are there any layoffs expected as a result of the ongoing reorganization or sale process?
As announced previously, there are no changes in your day-to-day work or responsibilities as a result of this process. We are always looking at opportunities to improve operational efficiencies, and there have been pressures on our business (like many others) with the unprecedented health and economic situation we are facing globally. But our restructuring and sale process is not a part of those efforts and is not geared around cost take-outs.
Will there be any changes to my benefits or compensation – including my 401(k), vacation time, sick leave, and holiday programs – as a result of the ongoing reorganization or sale process?
You are being paid as usual throughout the restructuring and sale process. The U.S. Bankruptcy Court has authorized McClatchy to continue paying wages, providing health, dental, and vision insurance, and honoring other ordinary course employment benefits like vacation/sick time, 401(k) (including company match), etc. as usual.
What is our go-forward plan to attract new subscribers, and, in particular, the younger generation?
Over the past several years, we have made significant progress in our digital transformation. We have grown our digital-only subscriptions and we are now roughly evenly balanced between total audience and advertising revenues. Additionally, we’ve made strides in our smartphone-native app experience which has driven incremental subscriptions and allowed for a more personal experience-a critical platform for younger customers. We’re also constantly testing new, targeted online approaches to get our content in front of as many prospects as possible. We are leading with our product and showcasing examples of how strong, independent journalism is essential to our communities.
Are we planning on discontinuing our print offering as a result of the Chapter 11 process?
Print is foundational to our product offerings and revenue mix and an important way for our readers and subscribers to access our essential news and information. The majority of our customers however access our content online – on news sites, apps, videos, social media, podcasts, audio and the eEdition. We’ve introduced digital Saturdays in the majority of our communities and have found that our readers maintain a daily habit of accessing our news, exclusively online. We are always evaluating our business needs and ways we can serve our customers and community better. Currently, there are no plans to eliminate any more days of print delivery.
What are the benefits of the PBGC assuming our qualified pension benefits plan?
Under our proposed plan of restructuring, the assets and liabilities of the McClatchy’s qualified pension plan will be assumed by the PBGC. If the PBGC takes over the pension plan, it will continue to pay the Company’s qualified pension plan participants their benefits, subject to federal statutory limits. We believe that such a solution would not have an adverse impact on qualified pension benefits for substantially all plan participants.
Can the PBGC say “no” to the transfer of our pension?
The PBGC guarantees the qualified pension plan and is obligated to take the plan when a company reaches the point where it can’t afford it. In the past five months of negotiations with the PBGC, the PBGC has never suggested that it will resist taking over the plan. In fact, the only issue the Company is negotiating with the PBGC is how much the company needs to pay to PBGC for taking over the plan.
Can you give us an example of other media companies that utilized the Chapter 11 process to improve their financial position?
Chapter 11 is a commonly utilized legal tool that allows a company to operate as usual and maintain commitments to stakeholders while addressing financial issues. A number of well-known companies have gone through this process and emerged healthier on the other side – including, in the media industry, Gatehouse, Lee Enterprises, and iHeartmedia.
What are we telling our stakeholders about this filing? How are we communicating with our valued vendors, advertising partners, and subscribers throughout this process?
McClatchy’s management team has worked intensively to ensure that all externally facing colleagues have the resources to communicate clearly and accurately with our stakeholders, including vendors, advertisers, and subscribers. Further, we are confident that McClatchy’s proposed plan of restructuring provides a clear resolution to legacy pension and debt obligations and improves our cash position, protecting our future and maximizing outcomes for our stakeholders. For more information on communicating with stakeholders, please visit the additional stakeholder resources on this website: www.McClatchyTransformation.com.
Can we still use company credit cards for non-travel related expenses? For those expenses we charge to a personal card, will reimbursements be delayed?
Use of the company card during the filing period is limited to travel-related expenses only. Invoices for non-travel related items should be submitted to PeopleSoft (ePM) for payment. If there are payments envisioned for credit cards that are not limited to travel – including those for vendors or issues with non-travel related expenses – please discuss this with your manager, who will be able to provide guidance and/or point you to the appropriate contact.
How will I be kept informed during this process? Where can I go if I have additional questions?
Questions regarding the Chapter 11 process are best directed to your manager or [email protected] You can also visit this dedicated website, www.McClatchyTransformation.com, for more information throughout the process.