McClatchy Newspapers, the parent company of the Miami Herald, formally announced today it's filing for bankruptcy and handing control to a hedge fund. The news isn't a surprise to the company's workers: Last year, McClatchy announced it didn't have nearly enough money to pay out the pensions it owes to former employees. The company seemingly had few options left besides bankruptcy, but the news is frightening for its workers all the same.
"When local media suffers in the face of industry challenges, communities suffer: Polarization grows, civic connections fray and borrowing costs rise for local governments... We are moving with speed and focus to benefit all our stakeholders and our communities," CEO Craig Forman told the Associated Press today. (Forman has cut budgets and personnel while receiving a seven-figure salary and a personal housing stipend.)
Company employees don't quite share Forman's rosy view. Herald employees, for example, have privately worried for weeks that new rounds of layoffs might happen. Last month, the paper abruptly shuttered its printing plant in Doral and laid off more than 70 workers after having opened the plant only eight years ago.
More slashing will likely continue. Provided a court approves McClatchy's Chapter 11 bankruptcy request, the company's new owner will be McClatchy's largest shareholder, the hedge fund Chatham Asset Management.
The news is simply bad for the company's journalists — private equity companies in recent years have decimated the news industry. Another hedge fund, Alden Global Capital, has bought up massive stakes in newspaper chains, including the nation's second-largest, Digital First Media, and slashed staffs despite still turning a profit. Alden has admitted that its plan, in some cases, was to make money from the real estate some legacy newspapers still own rather than from the company's journalism. It's unclear how Chatham plans to make money from taking over McClatchy's 30 newspapers.
Chatham said it owes $530 million in pension benefits alone. At the same time, McClatchy still owes more than $700 million in debt from the $4.5 billion the company paid to buy competing newspaper chain Knight Ridder in 2006, a move widely considered one of the most disastrous financial choices in the history of the news industry.
Today the newly formed One Herald Guild, a union representing roughly a hundred Herald editorial employees, said it's concerned about the paper's new ownership.
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"In response to the justifiable concerns about a hedge fund, Chatham Asset Management, taking over ownership of the company, we can only reiterate our unwavering commitment to fighting for strong local journalism and the newsroom that produces it," the guild said today in a statement posted online.
The union will also likely save reporters' jobs and potentially guarantee severance packages or buyouts if Chatham decides to slash the company's labor force. One Herald Guild has not yet ratified its first contract with McClatchy, and the company must negotiate any layoffs or buyouts with the guild before announcing them. (The guild is also still demanding that McClatchy allow three Herald writers — Flor Paz, Douglas Rojas-Sosa, and Angel Doval — to join the union.)
"Today's announcement serves as a stark reminder of why we unionized," the guild said today. "Our journalism is only as strong as the people who work in our newsroom."