McClatchy’s troubles can be traced back to 2006, when it bought its much larger rival, Knight Ridder, then the second-largest newspaper chain in the United States, for $4.5 billion, plus the assumption of $2 billion in debt. From the time shortly after the merger to the end of 2018, McClatchy’s work force went from more than 15,000 full-time employees to around 3,300, according to public filings. The current bankruptcy plan calls for McClatchy to cut staff further through 2022.
The Knight Foundation, a journalism nonprofit that originated with the family whose Knight Newspapers merged with Ridder Publications to form Knight Ridder, declined to comment for this article. It reported an endowment of more than $2.4 billion in 2019.
Chatham Asset Management, the company that could end up the winner of the McClatchy auction, is led by Anthony Melchiorre. In addition to taking control of the supermarket-tabloid publisher American Media in 2014, Chatham is a major investor in Postmedia, the publisher of Canadian newspapers including The National Post, The Montreal Gazette and The Ottawa Citizen.
Mr. Melchiorre, a Chicago-area native, worked on Wall Street at Goldman Sachs and Morgan Stanley, where he led its junk bond division. He set up his hedge fund in Chatham, N.J., in 2002. Chatham often takes on the debts of struggling businesses that still have good cash flow. American Media and McClatchy fit that profile.
For more than two years, the hedge fund has been trying to unload American Media publications, including The Enquirer. In 2018, American Media announced the sale of The Enquirer to the family that founded the Hudson News chain of newspaper and magazine shops. That deal still has not closed.
Chatham pushed for a sale of The Enquirer and other tabloids after American Media was under federal investigation. The chairman, David J. Pecker, was said to have helped Donald J. Trump’s presidential candidacy through a deal struck with Karen McDougal, a Playboy model who said she had an affair with Mr. Trump. American Media acquired her story for $150,000 and never published it, a practice known as catch-and-kill.