Hedge-fund manager Chatham Asset Management LLC emerged as the winner in a bankruptcy auction for McClatchy Co., ending 163 years of family ownership for the newspaper chain and increasing financial investors' control of the American publishing industry.
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The sale, announced by McClatchy on Sunday, must be approved by the judge overseeing its bankruptcy. McClatchy publishes some 30 daily papers, including the Miami Herald, the Sacramento Bee and the Kansas City Star.
The sale price for McClatchy's assets couldn't immediately be learned. A purchase agreement should be filed in the U.S. Bankruptcy Court in Manhattan in coming days, McClatchy said.
For years, the U.S. newspaper industry has struggled to cope with the collapse of print advertising as readership has moved online and the digital ad market became dominated by tech platforms like Alphabet Inc.'s Google and Facebook Inc. McClatchy filed for chapter 11 protection in February before the outbreak of coronavirus, which has further destabilized the industry, causing widespread layoffs and cost cuts.
A sale to Chatham would mean roughly one-third of all newspapers sold in the U.S. each day are published by companies controlled by financial institutions. Fortress Investment Group LLC manages Gannett Co., the country's largest newspaper chain, with Apollo Global Management Inc. as the primary lender. Alden Global Capital LLC owns MediaNews Group, which publishes some 60 dailies, including the Denver Post, San Jose Mercury News and the St. Paul Pioneer Press.
As McClatchy's auction moved toward a close in recent days, Chatham and Alden emerged as two main bidders for the company.
Alden had challenged Chatham for control of McClatchy, seeking a court order last week blocking Chatham from using debt claims as currency in its bid for the newspapers. A bankruptcy judge denied Alden's request, which was also opposed by McClatchy.
Chatham, a New Jersey-based hedge fund, is no stranger to media, also backing tabloid publisher American Media LLC, owner of the National Enquirer. The fund manager also holds a large stake in Postmedia Network Canada Corp., a publisher of dozens of newspapers in Canada, and several big newspaper and magazine distribution companies.
Chatham had become McClatchy's largest creditor in recent years and a significant shareholder.
The sale of McClatchy's newspapers would mark a key development in its bankruptcy, though the company also must resolve open disputes over its pension obligations. The U.S. government's pension insurer, Pension Benefit Guaranty Corp., and a committee of McClatchy unsecured creditors have been scrutinizing debt swaps the company completed with Chatham before the bankruptcy that elevated some debt over its pension obligations.
Judge Michael Wiles said last week that he would allow the committee to file a lawsuit over the debt transactions depending upon the outcome of the McClatchy auction.
Dow Jones & Co., publisher of The Wall Street Journal, is a member of McClatchy's creditors committee.