As you know, since issuing our third-quarter earnings in November, we have been in active restructuring negotiations with our secured lenders and bondholders, as well as the Pension Benefit Guaranty Corporation (PBGC), about our capital structure and pension obligations moving forward. 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.
We will continue to operate as usual during this process – with the same unwavering commitment to delivering strong, independent journalism that is essential to our local communities. McClatchy has obtained debtor-in-possession financing of $50 million which, coupled with the Company’s normal operating cash flows, will provide ample liquidity through which McClatchy and all of our local news outlets will operate as usual throughout this process.
There are no changes in your day-to-day work and responsibilities, or wages, salary, and benefits as a result of today’s filing.
Our voluntary filing with the U.S. Bankruptcy Court protects stakeholders’ interests and includes typical motions in the restructuring process that we expect to be resolved in the next several days, including 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). We also expect a brief period (of no longer than 48 hours) in which company credit cards may be inactive as part of this process. Please know that ensuring these cards are operational is among our top priorities. During the period of this restructuring, credit card charges will be limited to travel-related expenses only.
McClatchy doesn’t undertake this restructuring lightly. And we aren’t the first news company to go through this.
By restructuring, McClatchy will be able to emerge without the limitations of our capital structure and pension-payment obligations from another era. Under our proposed plan of reorganization, once the restructuring is completed, we will have a stronger capital structure, and employees and other stakeholders will benefit from a financially strong and digitally advancing McClatchy. Further, under our proposed plan, PBGC would take over McClatchy’s qualified pension plan—including the $1.393 billion in assets—and pay benefits to the plan participants, subject to federal statutory limits.
Our proposed plan of restructuring also outlines that McClatchy would transition majority ownership to Chatham Asset Management, a lender and shareholder for over a decade with proven experience collaborating with media companies. This represents a significant milestone in our 163-year history.
Above all else, we are committed to achieving the best possible outcome for our stakeholders in an efficient and organized process. With so many key parties collaborating in this process, we expect to emerge from Chapter 11 in the next few months.
Naturally, you will have questions about today’s announcement. We are committed to keeping you updated throughout this process. To do this, we have created a dedicated microsite here on McClatchyTransformation.com, which includes additional 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.
In closing, I want to reiterate we are operating business-as-usual. Your continued dedication to this mission is critical to our ability to navigate this process successfully and maintain our focus on providing essential local journalism to communities we serve.
Together, we will ensure a strong future for McClatchy.
Chief Executive Officer, McClatchy
Frequently Asked Questions Updated as of February 21, 2020
- Is my job safe? Are there any layoffs expected as a result of this announcement?
You should see no change in your day-to-day work or responsibilities as a result of this process. To be clear, the objective of this process and our proposed plan is to align the company’s capital structure with the size of our operations. Of course, we are always looking at opportunities to improve operational efficiencies, but our Chapter 11 process is not a part of those efforts and is not geared around cost take-outs.
- How will this process impact day-to-day operations? Will my role or responsibilities change as a result of this announcement?
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.
- Will there be any changes to my benefits or compensation – including my 401(k), vacation time, sick leave, and holiday programs?
You will be paid as usual throughout the restructuring 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), etc. as usual.
- Will there be any changes to my 401(k) as a result of this filing? Will McClatchy continue matching – and at the same percentage of my contribution?
There will be no changes to employee salary, wages, or benefits, including the company match in the 401(k) as a result of the filing.
- 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.
- Has Chatham indicated what its plans are once assuming majority ownership? What role will Chatham play in go-forward decision making?
Chatham has proven experience collaborating with media companies and is committed to our mission of delivering strong, independent local journalism that is essential to the communities we serve. McClatchy has a long-standing relationship with Chatham, a lender and shareholder to our business for over a decade, and we are confident that this is the best choice to protect the Company’s future and position us to accelerate our digital transformation.
- 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.
- Will McClatchy keep its name?
We do not expect McClatchy to change its name as a result of this filing.
- 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 our microsite: https://www.mcclatchytransformation.com
- Are we still hiring? What do we tell potential new hires about the restructuring?
We will continue to hire throughout this process. We remain focused on hiring the best talent in the industry and are excited to welcome more colleagues to McClatchy newsrooms to continue to deliver strong, independent local journalism to the communities we serve.
- 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 this 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.
- 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?
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.
- 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 restructuring microsite, www.McClatchyTransformation.com, for more information throughout the process.