SACRAMENTO, Calif., June 22, 2020 – McClatchy today responded to the Standing Motion filed by the Official Committee of Unsecured Creditors (UCC) in the Company’s Chapter 11 case. The motion, which states the UCC’s intent to bring claims against McClatchy’s Board of Directors and certain officers, challenges the carefully guided decisions the Company made in the years leading into its Chapter 11 filing in February 2020.
“McClatchy’s Board and officers take very seriously their fiduciary responsibility, independence, and role of protecting the financial best interests of McClatchy and its stakeholders. The UCC’s claims are baseless, frivolous, and meritless, and risk not only the value for creditors and stakeholders in the restructuring process, but also significant damage to McClatchy’s 163-year reputation. The company intends to vigorously dispute both the Standing Motion, as well as the claims more broadly.”
“Contrary to the UCC’s claim, McClatchy was operating as a going concern in 2018 when the Company executed a transaction to exchange its unsecured notes held by Chatham Asset Management (Chatham) for secured notes, giving McClatchy additional runway to implement its digital transformation. In fact, McClatchy was current on its debt payments; was actively pursuing M&A opportunities that would have delevered the balance sheet and strengthened the business; and had reason to believe it could potentially expect legislative relief on its pension obligations. That relief was made law in December 2019 for some community newspaper companies but not McClatchy. As a result, the company was compelled to voluntarily file for Chapter 11 protection on February 13, 2020.”
“Importantly, McClatchy’s independent auditor had issued no opinion indicating that there were issues with the Company’s liquidity or ability to pay its debts in 2018. If McClatchy’s auditor possessed such concerns, it would have been required under Public Company Accounting Oversight Board rules to disclose them.
“Further, the 2018 transaction was subject to a competitive bidding process that resulted in multiple term sheets, and the selected transaction was the most compelling option for maximizing stakeholder value. McClatchy, its officers and its Board were advised concerning their business judgement duties continuously during this period by leading legal and financial advisors.”
“The UCC also contends that Chatham held undue influence at McClatchy, despite the fact that McClatchy’s Board rejected multiple unfavorable transactions proposed by Chatham.”
Resources & Additional Information
Additional information about the Chapter 11 process can be found by visiting McClatchy's dedicated site at https://McClatchyTransformation.com. In addition, legal filings and other information related to the Chapter 11 case are available at www.kccllc.net/McClatchy, or by calling +1 (866) 810-6898.
McClatchy operates 30 media companies in 14 states, providing each of its communities with strong independent local journalism in the public interest and advertising services in a wide array of digital and print formats. McClatchy publishes iconic local brands including the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The (Raleigh) News & Observer, and the Fort Worth Star-Telegram. McClatchy is headquartered in Sacramento, Calif. #ReadLocal
Statements in this press release regarding the sufficiency of the company's existing resources to fund its ordinary-course operations and commitments to stakeholders, as well as the restructuring and sale process, and any other statements about management's future expectations, beliefs, goals, plans or prospects constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words "believes," "plans," "anticipates," "expects," "estimates" and similar expressions) should also be considered to be forward-looking statements. There are a number of important risks and uncertainties that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the effects of the Bankruptcy Court rulings in the Chapter 11 proceedings and the outcome of the proceedings in general; the length of time the Company will operate in the Chapter 11 proceedings; our restructuring efforts rely on coming to terms with multiple parties who may have conflicting interests; the potential adverse effects of Chapter 11 proceedings on the Company's liquidity or results of operations or its ability to pursue its business strategies; increased levels of employee attrition during the Chapter 11 proceedings; we may experience further diminished revenues from advertising as a result of the COVID 19 pandemic than anticipated as this crisis evolves; we may also experience increased costs and other disruptions as a result of COVID 19; we may not achieve our expense reduction targets including efforts related to legacy expense initiatives or may do harm to our operations in attempting to achieve such targets; our operations have been, and will likely continue to be, adversely affected by competition, including competition from internet publishing and advertising platforms; increases in the cost of newsprint; litigation or any potential litigation; geo-political uncertainties including the risk of war; changes in printing and distribution costs from anticipated levels, including changes in postal rates or agreements; changes in interest rates; increased consolidation among major retailers in our markets or other events depressing the level of advertising; competitive action by other companies; and other factors, many of which are beyond our control; as well as the other risks listed in the Company's publicly filed documents, including the Company's Annual Report on Form 10-K for the year ended December 29, 2019. These forward-looking statements speak as of the time made and, except as required by law, we disclaim any intention and assume no obligation to update the forward-looking information contained in this release.