McClatchy Co. started a $1.15 billion private debt exchange offer Thursday as the nation's third-largest newspaper publisher tries to reduce approximately $2 billion in debt and improve its balance sheet.
Like many publishers, the owner of The Miami Herald and The Sacramento Bee has come under pressure as ad sales continue to dwindle. The recession and an ongoing shift of readers to the Internet have not helped either.
McClatchy said that it wants to exchange some notes due between 2011 and 2017 as well as some debt set to mature between 2027 and 2029 for up to $60 million in cash and up to $175 million new senior notes due 2014.
The 152-year-old McClatchy also amended a $1.15 billion credit agreement in order to put some of the funds toward the debt offer. In addition, the Sacramento-based publisher will use up to $60 million of the revolving component of its facility to buy back notes due in 2011 and 2014. The modified agreement lowers the revolving facility to $560 million from $600 million.
McClatchy had $140.8 million available under its credit agreements as of Wednesday.
"We believe that being able to have more flexibility in the use of our revolving credit facility will allow us to put the company in a stronger financial position to manage our capital structure through this downturn," Chief Financial Officer Pat Talamantes said in a statement.
The company held its annual shareholder meeting Wednesday.
McClatchy has implemented several cost-saving measures to try to stay afloat, including cutting its work force by one-third, or more than 4,000 jobs, in the past year while shedding other expenses, including the dividend that it had been paying shareholders.
Experts have worried that the company may still not be able to meet its financial commitments, which could send the publisher into Ch. 11 bankruptcy protection — a method tapped by seven other newspaper publishers since December.
McClatchy's debt comes primarily from its 2006 acquisition of Knight Ridder. The company has already negotiated with lenders for more flexibility, which came at the price of higher interest rates and requirements for more collateral.
The recession has worsened McClatchy's position. After its ad revenue dropped 18 percent last year, it plunged 30 percent during the first three months of this year. Conscious of the Internet shift, McClatchy trying to win advertisers back by driving more sales to its Web sites and offering commissions to agencies that help place ads in the print editions of its newspapers.
McClatchy has 30 daily newspapers, approximately 50 non-dailies, and direct marketing and direct mail operations.