McClatchy to Declare Bankruptcy?

What does this mean exactly?

 

Pretty much that they won't be going through a years-long bankruptcy, like Tribune did, and that the company will be sold intact, as opposed to some individual papers being bought.

Beyond that . . . no clue.

 

I wonder if everyone taking a bath because of COVID makes this a good or bad time to go through this. I’d like to read Lancey’s take. Since lots of assets are distressed, are you more patient with the business? I’m explaining this poorly, I know.

 

Does this mean McCutcheon could be bought by uh, Gatehouse/Gannett or that hedge fund that's causing all the problems in Denver/Boulder, turning those papers into worthless trash? Is some group going to buy all those newspapers and Websites? Some company is going to be huge (for now). The key to whether McCutcheon is valuable to anybody IMO is how many of those newspapers still are located on prime property, in buildings and land that could be sold by the hedge funds.

 

This is one of the big companies. So tell us in layperson terms ... is this company likely to be bought by one of the hedge fund companies or Gatehouse? What up?

 

I am not a bankruptcy lawyer but suspect there is never a good time.

But I think COVID-19 presents two imminent threats to many newspapers. Many newspapers kept cutting and cutting and were able to generate at least some EBITDA. But now, given the massive losses in advertising, these papers are burning cash. I don't know how much patience the McClatchy creditors or the debt strapped Gannett management will have to carry a paper, hoping that it will return to positive cash flow. Especially if the entire chain is suffering from negative cash flow.

McClatchy and Gannett have been generating EBITDA at a rate of about 10% of sales. Print advertising is about 40% of revenues. So if print advertising is now down 50% because of COVID-19 that means that cash flow for the company is probably negative. While the companies will try to cover that cash burn with increased electronic revenue and cost cuts it may not be enough.

First quarter earnings will be released in a week or so and it will be interesting , in a very morbid way, to see how far revenues have fallen.

 

Cash flow is basically being spent on legal fees, part of why they are looking to exit bankruptcy as soon as possible.

I'm not sure first-quarter revenues will say much. As someone who works on many McClatchy print products, I did not notice pandemic-related ad dropoff until three weeks ago.

 

When McClatchy exits bankruptcy exits bankruptcy the biggest creditor, Chatham Asset Management, will almost certainly control the company. But there is a substantial pension liability owed to the PGBC. Evidently they think they might be getting stiffed. I think there are now enough lawyers involved that it could take a while.

McClatchy Gets Takeover Offer From Chatham, Brigade Capital

 

I agree that first quarter revenues will not tell a clear story. But I think companies guidance will emerge on second quarter revenue trends.

For example, I just watched a CNBC interview with the CEO of Union Paciifc. He said the company saw a seven per cent drop in first quarter revenue but was seeing a 25% drop in April revenue.

 

McClunkchy looks like it is doing something smart, buddying up to Google. If as some post the hedge fund may own McClunker soon enough, that can't be good news for those newspapers. The hedge fund will have zero interest in journalism/product.