Gannett, Gatehouse talking merger

It seems the hearing has been pushed until tomorrow. Evidently Alden or another hedge fund, Chatham, are the frontrunners.

Newsonomics: There’s no Knight in shining armor coming to rescue McClatchy

Gannet/Gatehouse has to start paying the bankers this month. They need to make an interest payment of approximately 100 million dollars. So I only see the company spending money on priority items like golden parachutes in the near future as they try to conserve cash.

 

I’ve heard of some more layoffs. Kind of guessing it’s a steady thing now.

 

That article is interesting. Let's say Chatham as expected buys/keeps McClatchy. What's that mean for the next year in that 30 newspaper chain? Total slashing of staff or just other kinds of cost saving?

 

There will be further cost cutting. My question is how many of the 30 papers are still generating positive cash flow during the pandemic. Will Chatham, or Alden, close properties?

The great question facing the newspaper business is this. Revenues had been in a about 20%. That business never came back. Advertising revenues appear to be down about 12-15% in this crash. Will that business come back? The typical newspaper chain had been generating EBITDA of about 10 percent of revenues. So I think chains are on negative cash burn.

 

Everything you can imagine and worse. The websites will be ruined with horrible, intrusive advertising. The papers will be reduced to nothing. More staff than usual will tweet about being let go. In a nutshell, under Chatham or Alden, the next year for McClatchy will be a slow-moving car crash.

 

Holy cow. do Chatham and Alden have their own internal setups regarding one location where all the newspapers are designed, etc? I think McClatchy has one or two of them. These hedge funds are interesting. I wonder if they ever discuss "journalism" with the suits. For instance, will they immediately fire all the executives at McClatchy? Or is there a wink/wink system in which CEOs are always kept? Will they immediately issue a 20 percent order for all papers? To slice 20 percent of the newsroom bodies? Fascinating but sad.

 

There are several people on this board who have knowledge of the operations of Alden in Colorado. I only know what I read, mostly from Michael Roberts, who writes for the local alternative weekly. So these contributors can help me out.

But I believe Alden operates two newsrooms 23.5 miles apart. One is for the Denver Post and the second, outside Boulder, is for the papers in Boulder, Longmont, Loveland, Greeley and some smaller papers. I read that Boulder also is something of a design hub for Alden.

I would guess the wages being paid to staff in Denver are more than in Boulder. I know the Post is unionized but I don't know about the Boulder operation. But I am surprised that Alden has not done what Newhouse did in Cleveland. In Cleveland Newhouse created Cleveland.com and eliminated the Plain-Dealer staffers.

I don't know why Alden has not done this in Denver yet. It may be union contracts.

 

With the newspapers down to basically no ads during COVID and the business deemed dead, how do hedge funds make $$ off acquiring newspapers? If there's no money coming in, why mess with newspapers? don't get it. That would be like somebody investing in Blockbuster type stores that rent movies.

 

Who is the superstar amongst hedge funds and how is he (or she) not nicknamed the Hedgehog?

 

Apollo financed all the debt for Gatehouse and Chatham for McClatchy (and Buffett is financing Lee). The lenders charge very high interest rates. If the paper pulls through then the hedge fund makes money from the successful loan.

If the paper goes bust the lender forecloses and takes control of the paper, cutting out the shareholders and most likely getting out of the pension obligations which are assumed by Pension Board Guaranty Corporation. Lots of newspapers have sold their headquarters for cash and them lease them back. In bankruptcy it is possible to get out of those leases and move staff into a strip mall with a cheaper lease.

Apollo, Chatham and Buffett lent this money before the COVID crash. If they had known about COVID, which is of course impossible, I don't know if they would have made the same deals. But they are to some extent stuck.

I don't know why Alden is bidding for McClatchy in this economic climate unless they are coming in with a low ball bid and they figure if they win they can find ways to squeeze more blood from the papers.