Putting the Raleigh N&O and Char-O in a precarious position:
The refinancing of the company made Chatham — the principal owner of American Media Inc., the publisher of the National Enquirer supermarket tabloid — the largest debt holder in McClatchy.
Enter Alden Global Capital, a New York hedge fund that has become a major force in the newspaper business. In a surprise move on Wednesday, Alden filed an emergency motion in a U.S. Bankruptcy Court asking Judge Michael E. Wiles to stop Chatham from attempting to buy McClatchy through a credit bid, a transaction that would allow it to put the company debt it had assumed toward the purchase price.
Full disclosure: I don't know diddly about how bankruptcy courts operate, and I hope I never become learned on the subject. But I also believe in "learning from the mistakes of others," and Alden should be the last company allowed to control NC's flagship newspapers:
Now that Alden has joined the proceedings, the auction, originally scheduled to start Wednesday morning, has been postponed indefinitely, McClatchy said in a court filing. A remote hearing is scheduled for Thursday at 10:30 a.m.
McClatchy’s filing said that it had “received two or more” bids for the chain.
Alden’s MediaNews Group has drastically cut costs at newspapers it manages. In 2018, staff members at the Alden-owned Denver Post openly rebelled, publishing a special section filled with articles critical of ownership. “If Alden isn’t willing to do good journalism here, it should sell The Post to owners who will,” The Post’s editorial board wrote in the lead editorial.
From 2004 to 2019, roughly half of all newspaper jobs in the United States were eliminated as the cumulative weekday circulation of print papers fell to 73 million from 122 million, according to a University of North Carolina study.
With my admittedly poor understanding of these proceedings in mind, it appears Alden may have the upper hand in this. They will likely be able to offer more (in hand) dollars than Chatham, because of Chatham's money + debt bid for McClatchy. And if Chatham can't succeed by using that combination, and is forced to up their actual dollars to acquire the newspaper chain, that debt will still remain. In other words, whichever fund does acquire McClatchy if only dollars are used, deep cost-cutting is in the future.
Unless McClatchy does the honorable thing and accepts Chatham's initial bid, even if it means fewer in-hand dollars. By "honorable" in this context, I am referring to the future treatment of loyal employees, not some sort of guilt over the debt that Chatham incurred to keep McClatchy afloat. The execs at McClatchy have a responsibility to at least make that effort.