Bankruptcy judge OKs McClatchy’s sales plan, initial bids are due next week
A federal bankruptcy judge approved McClatchy Co.’s rules for potential buyers Thursday, and the company said all interested parties are ready to submit initial bids by early next week.
A hearing to approve a buyer is scheduled for July 24.
McClatchy and its two largest creditors announced in mid-April that the company was initiating a sales process as negotiations over a restructuring plan lagged. The company said it has had preliminary discussions with 20 potential buyers.
But Judge Michael E. Wiles slowed the process last week when he ordered the company and creditors, big and small, to come back to him with agreed upon bid procedures and a timetable. A detailed compromise was offered in court filings late Tuesday and, on Thursday afternoon, Wiles agreed to it with some minor stipulations.
“I think the clarity is in everybody’s interest, and I appreciate that you took me up on my suggestion last week that you do this,” Wiles told the parties in the Chapter 11 bankruptcy case via teleconference, as the U.S. Bankruptcy Court for the Southern District of New York remains closed because of the coronavirus crisis.
Lawyers representing both the most and least protected, or unsecured, creditors weighed in on Thursday’s call to confirm a timetable that would have the company close the door on final bids and good-faith deposits July 1 and reach a deal by July 15. An auction would be held July 8 if more than one qualified bidder emerges.
The company had proposed that the judge sign off on a sale July 23. But, in a moment of courtroom levity, Wiles said that final date was problematic.
“That’s my birthday, I would rather do it July 24,” Wiles said, prompting Van C. Durrer II, the lead bankruptcy lawyer for McClatchy, to agree on the date change with a caveat.
“We hope you will be over the hangover by the 24th.”
Wiles allowed McClatchy to stick to its initial bid deadline of May 12, but asked the company to add language to its filing from earlier this week to ensure that if a serious bidder expresses interest at a later point, they could still participate.
Durrer agreed, but said that he had already approached the parties presently under a non-disclosure agreement and that all indicated the May 12 deadline would not be a problem.
“Our view is, everybody is ready to go,” Durrer, of Skadden, Arps, Slate, Meagher & Flom LLP, told Wiles.
The chance of additional bidders “is low,” Durrer said, but the company will be flexible “if someone is willing to show real interest.”
The judge also addressed a complex part of the bid process involving a so-called stalking horse bidder. A stalking horse is a bidder whose offer effectively serves as a floor or starting point. One of McClatchy’s two largest protected creditors, the hedge fund Chatham Asset Management, has offered in a court filing to be that bidder.
When McClatchy entered bankruptcy in mid-February, its restructuring plan had Chatham emerging as the new owner in exchange for wiping out 55 percent of the company’s debt.
But, in mid-April, with the coronavirus pandemic crushing advertising revenue and slowing negotiations because face-to-face mediation was impossible, McClatchy and its top creditors added the option of selling the company.
The bankruptcy case is now proceeding on those two tracks. After two months of mediation on the restructuring plan, initial settlement proposals were exchanged last week, an apparent sign of movement.
McClatchy has not said publicly whether it intends to accept Chatham as a stalking horse bidder. Wiles said he would give any of the parties in the bankruptcy proceedings an expedited hearing on three days’ notice if they have an objection once the company makes its selection.
References in court filings suggest that McClatchy wants to leave time for possible Justice Department review of any deal for the nation’s second largest local news company. That would be required only if another large media company were to emerge as the buyer, as they could own newspapers or television stations in some of McClatchy’s 30 markets, creating fears of a monopoly.
Sacramento-based McClatchy’s holdings include the Miami Herald, the Kansas City Star, the Sacramento Bee, the Charlotte Observer, the (Raleigh) News & Observer and the Fort Worth Star-Telegram.
This story was originally published May 7, 2020 at 4:57 PM with the headline "Bankruptcy judge OKs McClatchy’s sales plan, initial bids are due next week."
