McClatchy: Pension Distress Termination, Chatham 363 Sale, and End of Family Control

The McClatchy Company filed chapter 11 petitions for 54 jointly administered debtors on February 13, 2020, in the U.S. Bankruptcy Court for the Southern District of New York under lead case 20-10418 before Judge Michael E. Wiles. The case was a pension-driven freefall on a pre-negotiated track: a $50 million debtor-in-possession revolver from Encina Business Credit, a distress termination motion for the company's 1944-vintage defined benefit pension plan, and a joint plan of distribution and disclosure statement filed the same day as the petitions.

Chatham Asset Management, the largest first-lien holder after a 2018 refinancing, ultimately bought substantially all assets through a section 363 sale on a $262.9 million credit bid plus $49.2 million in cash, outbidding Alden Global Capital at a July 10, 2020 auction. The Pension Benefit Guaranty Corporation took over the company's underfunded retirement plan covering more than 24,000 participants, and the confirmed plan routed remaining assets through a wind-down estate, JCK Legacy Company, that has continued to administer trust distributions through 2025. The case ended 163 years of McClatchy family control of the publishing business.

Debtor(s)	JCK Legacy Company, et al. f/k/a The McClatchy Company (54 jointly administered entities)
Court	U.S. Bankruptcy Court, Southern District of New York
Case Number	20-10418
Petition Date	February 13, 2020
Confirmation Date	September 25, 2020
Effective Date	September 30, 2020
Final Decree	March 18, 2021
Judge	Hon. Michael E. Wiles
Claims Agent	Kurtzman Carson Consultants LLC
DIP Facility	$50 million ABL revolver from Encina Business Credit SPV, LLC (lender and agent)

From the Knight Ridder Era to a Pre-Negotiated Filing

McClatchy was a 163-year-old, family-controlled public media company headquartered in Sacramento that owned the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The (Raleigh) News & Observer, the (Fort Worth) Star-Telegram, and roughly two dozen other daily newspapers across 14 states. The First Day Declaration of CFO Sean M. Harding describes a company that had spent more than a decade trying to digitize its way out of a print revenue collapse: operating cash expenses were cut by approximately 60% between 2006 and 2018, full-time equivalent headcount was reduced 20.6% in the first half of 2019 alone, and the company executed a series of real-estate sale-leasebacks. As of the petition date McClatchy employed roughly 2,800 people.

McClatchy reported 55.7 million average monthly unique visitors and 3.4 billion digital page views for the year ended December 29, 2019, with digital-only subscribers up 114% between Q4 2017 and Q4 2019. Those figures supported a going-concern narrative for a credit-bid acquirer but did not generate enough cash to service the company's funded debt and 1944-vintage pension simultaneously.

Skadden filed the joint chapter 11 plan and the disclosure statement alongside the petitions on February 13, 2020, the DIP motion and the distress termination motion for the pension plan went on the docket the same day, and the company had reached terms with Chatham Asset Management and Brigade Capital Management before filing. The 2018 debt exchanges with Chatham — described in the next section — had concentrated the funded debt in the hands of two creditor groups whose treatment governed everything that followed. McClatchy's two attempts to merge with another newspaper company in 2019 had failed because no acquirer would assume the pension liability, leaving in-court restructuring as the only path to remove the pension from the operating company.

Capital Structure and the 2018 Chatham Refinancings

McClatchy entered chapter 11 with approximately $703.3 million in funded debt across five tranches, plus a Wells Fargo asset-based revolver. The current shape of the capital stack was set in the second half of 2018, when the company executed two transactions with Chatham affiliates: a $310 million issuance of 9.000% First Lien Notes due July 2026 used to redeem older first-lien debt, and an exchange of $193.5 million of Tranche B Second Lien Term Loans for an equal principal amount of new 6.875% Third Lien Notes due 2031. The exchange concentrated the junior secured stack in Chatham's hands and gave the fund the largest single creditor position when the company eventually filed.

The First Lien Notes, Second Lien Term Loan, and Third Lien Notes were each secured by substantially all of the prepetition obligors' assets, with intercreditor subordination among the three tranches. The Wells Fargo ABL was sized to accounts receivable and newsprint inventory and ranked senior on its priority collateral. Chatham held or controlled a substantial portion of the Third Lien Notes through the 2018 exchange and ultimately stood as the largest single funded-debt holder in the case. Brigade Capital Management was the other principal creditor party to the prepetition negotiations and to the eventual mediated plan settlement.

Pension Distress Termination and PBGC Trusteeship

The McClatchy Company Retirement Plan, established in 1944, covered roughly 24,500 participants — current and former employees, retirees, and beneficiaries of newspapers acquired over McClatchy's century-and-a-half of consolidation, including the 2006 Knight Ridder transaction. The plan was the central economic driver of the chapter 11. As of January 1, 2019, the plan was underfunded by $323.6 million under Internal Revenue Code measurement, and the PBGC's termination-basis estimate as of July 19, 2019 put unfunded benefit liabilities at $805.2 million. Required minimum funding contributions under IRC sections 412 and 430 were projected at approximately $124 million for fiscal 2020, $88 million for 2021, and $117 million for 2022 — figures that exceeded projected adjusted EBITDA for each of those years.

The McClatchy board resolved on February 12, 2020 to seek a distress termination of the pension plan, and the company filed its Notice of Intent to Terminate with the PBGC on the petition date. The distress termination motion sought a court order that the financial requirements of section 4041(c) of ERISA were satisfied and proposed an effective termination date of April 13, 2020. Groom Law Group served as special pension/ERISA counsel to the debtors. The PBGC filed a response and the parties negotiated through the spring and summer.

The pension was ultimately terminated effective August 31, 2020 and the PBGC took over as statutory trustee, assuming benefit payment obligations for the participant population. Under the confirmed plan, the PBGC received a $33 million secured note plus 3% of the new common equity in the reorganized company as Class 7 treatment, alongside its statutory takeover of the plan itself. A PBGC participant Q&A explains the post-trusteeship benefit framework.

Encina DIP Financing and Cash Collateral

The debtors entered the case with a $50 million senior secured, priming, superpriority asset-based debtor-in-possession revolver from Encina Business Credit SPV, LLC, which served as both lender and agent. Pricing was LIBOR plus 3.5% with a 1.5% LIBOR floor and a 2% per annum default-rate increase. The closing fee was $625,000, with a $2,500 monthly administrative fee, a 0.50% per annum unused-line fee, and a 1.5% early termination fee on terminated revolver commitments. The maturity was the earliest of 18 months from closing, 45 days after the petition date if the final order was not entered, the plan effective date, or closing of a sale of substantially all assets.

Use of proceeds covered working capital and general corporate purposes, administrative costs, repayment in full of the prepetition Wells Fargo ABL obligations, and adequate protection payments to prepetition secured creditors. The First Lien Notes Trustee and the Second Lien and Third Lien Notes agents received replacement liens on all DIP collateral. The First Lien Notes group received monthly cash interest payments at the non-default rate plus reimbursement of professional fees as adequate protection, and the Wells Fargo ABL agent received adequate protection for contingent reimbursement obligations. DIP liens were granted senior priority subject to prepetition permitted liens, the ABL priority collateral structure, and the DIP carve-out.

The court entered an interim DIP order on February 14, 2020 and a final DIP and cash collateral order on March 26, 2020. The Encina facility funded the case through the Chatham sale closing.

Chatham-Alden Auction and the 363 Sale

McClatchy ran a dual-track sale and plan-of-distribution process from Day 1, with the joint plan and disclosure statement filed alongside the first-day pleadings. The court entered bidding procedures on May 11, 2020, establishing the timeline and protections for a sale of substantially all assets.

Two qualified bidders ran an auction on July 10, 2020: Chatham Asset Management and Alden Global Capital, the only other major U.S. newspaper-focused private investor at the scale required. Chatham was designated the successful bidder on July 12, 2020, with an amended notice of successful bidder filed on July 17 and the successful-bid asset purchase agreement filed on July 24. The purchaser entity was SIJ Holdings, LLC, an affiliate of Chatham.

The consideration was a $262,851,000 credit bid and release of First Lien Notes claims plus an additional $49,152,903 in cash, for a total around $312 million before assumption of certain assumed liabilities. The sale hearing was held August 4, 2020 and the sale order was entered August 7, 2020. Judge Wiles' approval also incorporated the Stipulation Regarding Mediated Sale and Plan Settlement, the global deal among the debtors, the Chatham parties, the Brigade parties, and the Official Committee of Unsecured Creditors that linked the 363 sale to the chapter 11 plan and produced the eventual class treatment. The sale closed on September 4, 2020, and Chatham named Tony Hunter, the former CEO of Tribune Publishing, as McClatchy's post-emergence chief executive.

The transaction ended 163 years of McClatchy family control of the company, with chairman Kevin McClatchy stepping down in connection with the closing.

Plan of Distribution, Class Recoveries, and Third-Party Releases

The First Amended Joint Chapter 11 Plan of Distribution of JCK Legacy Company and its Affiliated Debtors and Debtors in Possession was confirmed by order entered September 25, 2020 and went effective on September 30, 2020. Because Chatham acquired substantially all operating assets through the 363 sale, the confirmed plan was a distribution plan: it routed sale proceeds, retained tax assets, the D&O settlement, and litigation recoveries to creditors through a series of post-effective vehicles, including a wind-down estate operating under the JCK Legacy Company name and a GUC Recovery Trust for general unsecured claims.

Upon emergence the reorganized debtors entered into three exit facilities: a $50 million Exit ABL Facility, a roughly $81 million Exit 1.5L Facility consisting of a conversion of Subordinated Chatham Notes Claims plus $30 million of new money from certain Chatham parties, and $217.9 million of New First Lien Notes at 10.000% maturing in 2026. D&O insurance carriers funded $4,587,500 into a GUC Recovery Trust escrow that was released to the trust on the effective date. FINRA later advised market participants that the company's prepetition Class 9 equity interests were cancelled and extinguished without consideration on the effective date.

The U.S. Trustee filed an objection to confirmation on September 18, 2020 raising six points: an improperly broad discharge and injunction for liquidating debtors under section 1141(d)(3); third-party release language sweeping in "all other Holders of Claims to the fullest extent permitted by law" rather than only opt-in parties; prospective releases for not-yet-existing wind-down debtors and trust vehicles; overly broad exculpation; administrative-expense treatment of fees of non-estate professionals (the Chatham and Brigade parties); and the absence of post-confirmation operating reports. The Official Committee of Unsecured Creditors filed a reply, the indenture trustee for the 2027/2029 unsecured debentures joined the Committee's response, and the debtors filed an omnibus reply. The U.S. Trustee's objections were resolved at or before the September 23, 2020 combined confirmation and disclosure-statement approval hearing. Oracle filed and then withdrew a limited objection and opt-out of the third-party release before the hearing.

The wind-down estate was funded with carved-out litigation, tax, and insurance assets and continued to administer claims and distributions long after the operating business transferred to Chatham.

The final fee order entered November 24, 2020 approved approximately $34.4 million in professional fees for the main engagement period, including $8.2 million for Skadden as debtors' counsel, $4.3 million for Evercore as investment banker (net of a voluntary 5% reduction and the cessation of monthly fees after July 31, 2020), $3.1 million for FTI as restructuring manager, $7.2 million for Stroock as Committee counsel, $3.6 million for Moelis as Committee investment banker, and $2.4 million for Togut, Segal & Segal as wind-down counsel. Berkeley Research Group, Ernst & Young, Deloitte & Touche, Groom Law Group, Dundon Advisers, and the Kurtzman Carson Consultants claims-agent retention rounded out the engagements.

Post-Effective: GUC Recovery Trust and the PBGC Termination Premium

The wind-down phase of the case generated two material litigation tracks worth following.

The first was the dispute between the GUC Recovery Trustee and the PBGC over a termination-premium claim of approximately $126 million asserted against the GUC Recovery Trust. The GUC Recovery Trustee objected to the termination premiums in September 2021, and the PBGC filed an opposition along with a motion to compel mediation over the trust's assets. The outcome of that dispute directly affected unsecured-creditor recoveries because the GUC Recovery Trust's assets were the only meaningful funding source for Class 8.

By August 2024 the dispute had been resolved enough for the Successor GUC Recovery Trustee to file a distribution motion stating that total trust assets had grown to approximately $20.1 million, consisting principally of $17.9 million in tax-refund proceeds, the $4.6 million D&O settlement balance, and an initial $400,000 purchaser contribution. The motion proposed distributions to Recovering Beneficiaries — holders of allowed general unsecured claims of $1,400 or more — at an estimated recovery of approximately 3.5% of allowed claims, more than double the 1.6% confirmation-time estimate. The court granted an extension of the GUC Recovery Trust's duration in September 2025 as the trustee continued to wind up final distributions.

The second post-effective track was a series of individual-creditor appeals brought by Alberto Colt-Sarmiento beginning in 2025, seeking reconsideration of the disallowance of Proof of Claim No. 2725. The bankruptcy court disallowed the claim by order entered March 21, 2025. Colt-Sarmiento filed a notice of appeal, which was docketed in the U.S. District Court for the Southern District of New York as Case No. 25-cv-3727 before Judge Edgardo Ramos and remained pending as of early 2026.

Other post-petition litigation tied to McClatchy worked itself out separately. Then-Representative Devin Nunes dropped his defamation suit against McClatchy in October 2020, citing the bankruptcy. Chatham Asset Management itself was the subject of a separate, unrelated SEC settlement of $19.3 million in April 2023 over fixed-income trading practices in funds that held McClatchy and A360 Media debt.

The chapter 11 cases were closed by final decree and order entered March 18, 2021. Under Chatham's ownership, McClatchy has continued to operate as a private newspaper publisher; Chatham executed a $40 million PIK toggle add-on for McClatchy in 2023 alongside other portfolio-financing moves, and the company has been the subject of further newsroom workforce reductions and, more recently, union grievances over an AI content tool.

Key Timeline

Frequently Asked Questions

Who is the claims agent for the McClatchy chapter 11 case?

Kurtzman Carson Consultants LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

Who bought McClatchy out of chapter 11?

Chatham Asset Management, through its affiliate SIJ Holdings, LLC, acquired substantially all of McClatchy's assets in a section 363 sale approved by the bankruptcy court on August 7, 2020. The consideration was a $262.9 million credit bid and release of First Lien Notes claims plus $49.2 million in cash, with the sale closing on September 4, 2020.

What happened to the McClatchy pension plan?

The McClatchy Company Retirement Plan was terminated effective August 31, 2020, and the Pension Benefit Guaranty Corporation took over as statutory trustee for the plan covering more than 24,000 participants. The PBGC received a $33 million secured note and 3% of the reorganized company's equity under the Class 7 treatment in the confirmed plan.

How much did general unsecured creditors recover?

The plan estimated a 1.6% recovery for Class 8 general unsecured claims at confirmation. The Successor GUC Recovery Trustee's August 2024 distribution motion reported total trust assets of approximately $20.1 million (largely $17.9 million in tax refund proceeds and the $4.6 million D&O settlement) and an estimated recovery of approximately 3.5% for Recovering Beneficiaries — holders of allowed general unsecured claims of $1,400 or more.

Who were the lead professionals in the case?

Skadden, Arps, Slate, Meagher & Flom LLP served as debtors' counsel, with Evercore Group L.L.C. as investment banker, FTI Consulting as restructuring manager, Togut, Segal & Segal LLP as wind-down counsel, and Groom Law Group as special pension/ERISA counsel. The Official Committee of Unsecured Creditors retained Stroock & Stroock & Lavan LLP as counsel and Moelis & Company LLC as investment banker. Kurtzman Carson Consultants LLC served as claims and noticing agent.

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