- Company faces $124 million pension contribution this year
- Finance chief cites ongoing discussions about restructuring
The McClatchy Co., the newspaper publisher that’s teetering near bankruptcy, skipped a payment to some of its pensioners.
The company will not be releasing funds to a “small number” of participants in its Supplemental Executive Retirement Benefits plan as it addresses its long-term liquidity pressures, McClatchy said in a statementThursday. The company faces a mandatory $124 million contribution to its pension plan in 2020.
“This decision is not taken lightly, but at a time when the company is actively negotiating the future of the qualified pension plan, it would be inconsistent with our culture to continue payments on the non-qualified plans,” Chief Financial Officer Elaine Lintecum said in the statement.
There’s no impact on operations or benefits under McClatchy’s $1.3 billionqualified pension, whose distributions continue, according to the statement. In an interview, Lintecum said the company hired Kurtzman Carson Consultants LLC to assist with incoming calls about the skipped pension payments. Units of KCC also provide bankruptcy and restructuring consulting services.
Warning Statement
In its third-quarter earnings release, McClatchy said the pension contribution created “a significant liquidity challenge in 2020.” It also warned in regulatory documents that it may not be able to continue as a going concern.
The Sacramento, California-based company operates 29 newspapers including the Miami Herald, The Charlotte Observer and The Kansas City Star. Other large newspaper companies are also in turmoil, with tens of thousands of newsroom jobs cut over the past decade.
S&P Global Ratings forecast a grim 2020 for McClatchy, warning in November that the company doesn’t have enough money to pay its 2020 obligations. “It could engage in a distressed debt exchange or file for Chapter 11 bankruptcy before September 2020, when the bulk of its mandatory pension contributions are due,” S&P analysts Thomas Hartmanand Vishal Merani wrote in a report.
Underfunded Plan
The pension plan was underfunded by about $535 million, according to an accounting last year. The company asked the federal government to waive its required contribution, but was denied.
McClatchy has held talks with parties including the federal Pension Benefit Guaranty Corporation about the possibility of the PBGC assuming the plan’s assets and obligations, the company said Nov. 13.
Chatham Asset Management LLC is the largest holder of McClatchy debt and, according to data compiled by Bloomberg, is its largest shareholder. Representatives for the firm, which is based in Chatham, New Jersey, didn’t immediately respond to a request for comment.
— With assistance by Paula Seligson
(Updates to add CFO comments on hiring of consulting firm in the fourth paragraph.)
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