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Mediation Schedule to Begin in Early March for McClatchy and PBGC

Monday, March, 2, 2020

The dispute over control of McClatchy Co.’s defined benefit plan will head to mediation beginning March 4th, according to a ruling from a federal bankruptcy judge.  The announcement was recently made by representatives from the company and PBGC.  It came as a result filed by McClatchy with the court asking the Judge to order mediation proceedings in the dispute.


McClatchy disclosed in November that is was discussing a PBGC take of its qualified defined benefit plan.  The plan was closed to all new participants in 2009.  It had $1. 3 billion in assets, but was underfunded by more than $5 million as of March of last year. 


According to the company, the $124 million in contributions coming due, “greatly exceeds the company's anticipated cash balances and cash flow given the size of its operations relative to the obligations due, and creates a significant liquidity challenge in 2020.”


Bankruptcy proceedings began in mid-February.  At the proceedings, PBGC expressed concerns over a plan to have hedge fund Chatham Asset Management assume ownership of McClatchy. 


It was just another bump in the road in the ongoing legal dispute that dates back to 2018 and arose from a series of debt deals arranged by Chatham.  The company already owned the vast majority of McClatchy’s unsecured bonds when it provided a new loan to extinguish old debts.  This freed up money for McClatchy to repay some of its debt, but was also a windfall for the hedge fund because it could trade in bonds.


Now, PBGC is calling the arrangement a potential fraudulent transfer and is asking for an opportunity to investigate.