Mayors urge federal judge to consider readers, communities when ruling on winning bid
By Julie Reynolds
A storied newspaper chain that has been family-owned for 163 years was auctioned off Friday in bankruptcy proceedings to a hedge fund known for reinvesting — at least modestly — in its newspapers.
Chatham Asset Management, which owns large stakes in The National Enquirer’s parent company and the Canadian news chain Postmedia, was left as the winning bidder in an auction Friday, prevailing over last-minute efforts by the more infamous vulture fund Alden Global Capital.
McClatchy announced Sunday that Chatham would buy the entire company.
A federal judge will have to approve the deal on July 24.
McClatchy Newspapers went into Chapter 11 bankruptcy earlier this year after struggling through years of debt. The chain operates 30 news outlets, including the Miami Herald, Kansas City Star, Sacramento Bee, Fort Worth Star-Telegram, Lexington Herald-Leader and Charlotte Observer.
Last week, mayors from a number of those cities filed letters with the bankruptcy court urging the judge who will approve any sale to consider whether the chain’s new owner will invest in local news for the benefit of their communities.
“Our community needs a strong daily paper that is locally rooted and locally invested in our community, motivated by the desire to serve the broader public interest and not the narrow bottom line,” wrote Mary-Ann Baldwin, mayor of Raleigh, North Carolina, where McClatchy operates the News and Observer. “Please consider paths for each of the local McClatchy papers that will help sustain and support strong, independent journalism.”
Mayors from McClatchy newspaper cities including Sacramento, Miami, Lexington and Kansas City wrote similar letters to the court, without specifically calling out Alden or Chatham.
“McClatchy newspapers inform the heart of America. Their role is no less important than that of the journalistic giants, who can survive on a national base of digital subscriptions but cannot effectively cover local communities,” wrote Kansas City Mayor Quinton Lucas. “I would urge you to choose the best possible steward to take on this important responsibility.”
Their concerns apparently stem from the fact that the top bidders came down to two hedge funds — one known for at least modestly investing in newspapers and the other for brazenly stripping them of assets to use in unrelated, outside investments.
The first bidder, Chatham, is McClatchy’s largest creditor and had already offered around $300 million for the chain in a deal that includes forgiveness for McClatchy’s existing $263 million debt with Chatham and at least $30 million in cash.
The late-hour upstart joining the bidding process was Alden, owner of the MNG newspaper chain. Alden first made its McClatchy intentions known last week, when it tried to challenge aspects of Chatham’s offer in court. That request was denied by U.S. Bankruptcy Judge Michael Wiles.
Journalists and other news workers had feared an Alden takeover of the chain. When Alden acquired the Reading Eagle and the Boston Herald, it laid off everyone and made workers re-apply for their jobs, eventually accepting back only three-quarters or less of the original workforce. Alden likely would have included similar conditions in its bid for McClatchy.
Although court records indicate Alden underbid Chatham, an Alden attorney told the court it could come up with more money to make the purchase. It’s not clear why it didn’t make the cut on Friday.
Where Alden would have come up with the cash remains, for now, a mystery — even as it has implemented across-the-board furloughs and layoffs at its papers, claiming financial hardship due to COVID-19.
A number of Alden’s previous investments on this scale — to the tune of hundreds of millions — have come from cash directly siphoned from its existing local newspapers, a practice Alden has admitted to in past court filings. That siphoning has left its papers and communities with barely staffed newsrooms.
At the same time, Alden has its sights on Tribune Publishing after it acquired nearly a third of the company and secured three of its seven board seats.
According to the Harvard Nieman Lab’s Ken Doctor, Chatham has at least “advocated for small but targeted investments in the digital-revenue-driven future of the business. (Alden’s haughty nihilism still stands alone, dis-investing even in a digital future, most recently seen in the single-day elimination of five Tribune execs.)”
Alden has “hollowed out local newspapers and their staff across the country,” Illinois Senators Dick Durbin and Tammy Duckworth wrote in a letter to Alden president Heath Freeman.
Objections before the winning bid is approved must be filed by July 20, according to a court filing.
It’s possible Alden’s offer could still be considered if for some reason Chatham is disqualified.
Judge Wiles is scheduled to preside over an approval hearing for the successful bid in the Southern District of New York bankruptcy court on July 24.
PHOTO: The once-grand Miami Herald building (since demolished) | Marc Averette, Wikimedia Commons