The publisher of the Miami Herald, The Kansas City Star and dozens of other newspapers across the nation has filed for bankruptcy protection.
McClatchy Co.'s 30 newsrooms, including The Charlotte Observer and The Star-Telegram in Fort Worth, will continue to operate as the publisher reorganizes under Chapter 11.
McClatchy's origins date to 1857 when it first began publishing a four-page paper in Sacramento, California, following the California Gold Rush. That paper became The Sacramento Bee.
McClatchy has received $50 million debtor-in-possession financing from Encina Business Credit. That, combined with normal operating cash flows, will provide enough cash for the company to continue.
"When local media suffers in the face of industry challenges, communities suffer: polarization grows, civic connections fray and borrowing costs rise for local governments," said CEO Craig Forman. "We are moving with speed and focus to benefit all our stakeholders and our communities."
McClatchy expects fourth-quarter revenues of $183.9 million, down 14% from a year earlier. Its 2019 revenue is anticipated to be down 12.1% from the previous year. That would mean that the publisher's revenue will have slid for six consecutive years.
The company expects to pull its listing from the New York Stock Exchange and go private.
Shifting to digital
McClatchy filed for bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York. Its restructuring plan needs approval from its secured lenders, bondholders and the Pension Benefit Guaranty Corp.
McClatchy and other newspaper chains have suffered as readers forgo traditional subscriptions and get news online.
Digital-only subscriptions have increased by almost 50% year over year, McClatchy said, and subscriptions are now roughly evenly balanced between total audience and advertising revenues, with digital accounting for 40% of those revenues and growing. The company has more than 200,000 digital-only subscribers and over 500,000 paid digital customer relationships.
The company has trimmed operating expenses by $186.9 million for the three-year period ended in December and paid off about $153.5 million in debt in the same period.
"McClatchy remains a strong operating company with an enduring commitment to independent journalism that spans five generations of my family,'' said Chairman Kevin McClatchy.
Forman said McClatchy doesn't anticipate any adverse impact on qualified pension benefits for substantially all of the plan's participants and beneficiaries.
Independent newspapers and chains alike are struggling. The estimated total U.S. daily newspaper circulation including both print and digital in 2018 fell 8% from the prior year to 28.6 million for weekday. Sunday circulation fell 9% to 30.8 million, according to the Pew Research Center for Journalism and Media.
Last year, New York Times executive editor Dean Baquet bleakly predicted the demise of "most local newspapers in America" within five years, except for ones bought by billionaires. The Washington Post and Los Angeles Times, both national publications, are thriving after being bought by billionaires. The Boston Globe, Minneapolis Star-Tribune and Las Vegas Review-Journal are among other major American newspapers that appear to have steadied themselves after being sold to local wealthy individuals.
Last month, fame investor Warren BuffettBH Media to Lee Enterprises. Lee will now own 81 daily newspapers including, The Buffalo News and The Omaha World-Herald.