McClatchy Co., owner of the Fresno Bee, files for Chapter 11 bankruptcy

FRESNO, Calif. (KFSN) -- McClatchy Co., the country's second-largest news company and owner of the Fresno Bee, announced it has filed for bankruptcy.

The company said Thursday its Chapter 11 filing would remove 60 percent of its debt and help direct the organization toward a digital future.

"While this is obviously a sad milestone after 163 years of family control, McClatchy remains a strong operating company and committed to essential local news and information," Kevin McClatchy, chairman of the company, said in a press release.

"While we tried hard to avoid this step, there's no question that the scale of our 75-year-old pension plan - with 10 pensioners for every single active employee - is a reflection of another economic era," he said.

McClatchy says it will continue to operate while in bankruptcy, and the filing will have "no immediate impact" on their administrative employees or the journalists in their 30 newsrooms across the country, including the Fresno Bee and the Sacramento Bee.

The newspaper industry has been deeply hurt by changing technology that has sent the vast majority of people online in search of news. Media companies have tried to shift online, with varying degrees of success, as their print ad revenue and circulation declined. Complicating matters, internet companies Facebook and Google receive most online ad dollars.

While some national newspapers, like The Wall Street Journal and The New York Times, are adding digital subscribers, helping them navigate advertising declines, many local outlets have had a difficult time. That has led to a string of consolidation, much of it involving investment firms, deepening concerns about declining quality as newsrooms shrink and papers close.

McClatchy's 2006 purchase of the Knight-Ridder newspaper chain for $4.5 billion added to McClatchy's debt and contributed to its financial woes as the industry's decline accelerated in subsequent years.

Though financial results aren't yet final, the company estimates that 2019 revenue fell 12.1% from the previous year, its sixth consecutive annual decline. McClatchy said its digital-only subscriptions have grown almost 50% to 200,000 over the past year.

But that growth hasn't made up for the loss of advertising revenue that once flowed to its print newspapers.

In court documents, McClatchy said 40% of its revenue now comes from digital sources. It said it is trying to shift away from being so reliant on advertising. It said half its revenue now comes from advertising, and half from circulation. The company said that for 2019, ad revenue fell 19%, while circulation revenue dropped 5%.

McClatchy has struggled to pay money owed to its pension fund and has been in negotiations with the Pension Benefit Guaranty Corporation, a federal guarantor of pensions, to assume control. In Thursday's filing with U.S. Bankruptcy Court in New York, it is seeking permission to appoint that corporation as the plan's trustee. McClatchy said "substantially all" of the plan's participants and beneficiaries should get their entitled benefits.

McClatchy plans to pull its listing from the New York Stock Exchange as a publicly traded company. Chatham Asset will be the new majority owner. Chatham also is the majority shareholder of Canadian newspaper chain Postmedia and owns National Enquirer publisher American Media Inc. American Media is in the process of selling the Enquirer.

McClatchy said it remained committed to journalism.

In a statement, Chatham said it was "committed to preserving independent journalism and newsroom jobs." Chatham said it has been "a supportive investor" in McClatchy since 2009.

The Associated Press contributed to this report.