Item 1.03 Bankruptcy or Receivership.
Voluntary Petition for Reorganization
On
The Company will continue to operate its business as debtor-in-possession under
the jurisdiction of the
Debtor-In-Possession Financing
To ensure access to sufficient liquidity throughout the Chapter 11 Cases, the
Debtors filed a motion seeking authority to execute, enter into and perform
under a proposed Debtor-in-Possession Credit Agreement (the "DIP Credit
Agreement") among
The proposed DIP Credit Agreement provides for a secured debtor-in-possession credit facility (the "DIP Facility") consisting
of a new revolving loan facility in an aggregate principal amount of
approximately
The proposed DIP Credit Agreement contains customary representations, warranties and covenants that are typical and customary for debtor-in-possession facilities of this type, including, but not limited to specified restrictions on indebtedness, liens, guarantee obligations, mergers, acquisitions, consolidations, liquidations and dissolutions, sales of assets, leases, payment of dividends and other restricted payments, voluntary payments of other indebtedness, investments, loans and advances, transactions with affiliates, sale and leaseback transactions and compliance with case milestones. The proposed DIP Credit Agreement also contains customary events of default, including as a result of certain events occurring in the Chapter 11 Cases. The proposed DIP Credit Agreement is subject to approval by the Court and will be subject to customary conditions precedent.
The foregoing description of the DIP Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the final, executed documents memorializing the DIP Facility, as approved by the Court.
Item 2.02 Results of Operations and Financial Condition.
In connection with the filing of the Chapter 11 Cases, the Company issued a
press release on
The information furnished in this Item 2.02, including Exhibit 99.1, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 2.03 Creation of a Direct Financial Obligation or Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.03 of this Form 8-K regarding the DIP Credit Agreement is incorporated herein by reference.
Item 2.04 Triggering Events that Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
The commencement of the Chapter 11 Cases above constituted an event of default, and caused the automatic and immediate acceleration of all debt outstanding under or in respect of a number of instruments and agreements relating to direct financial obligations of certain of the Debtors (the "Debt Instruments"). The material Debt Instruments include:
Junior Lien Term Loan Credit Agreement
·
fees and other expenses arising under or in connection with the Junior Lien Term Loan Credit Agreement, dated as ofJuly 16, 2018 , among the Company, the lenders party thereto, the guarantors party thereto and the Bank of New York Mellon (the "Junior Lien Term Loan Facility"), governing the 7.795% junior term loan due in 2030; Outstanding Notes
·
fees and other expenses arising under or in connection with the indenture, dated as ofJuly 16, 2018 , among the Company, the subsidiary guarantors party thereto and theBank of New York Mellon Trust Company, N.A. , governing the 9.000% senior secured notes due in 2026;
·
fees and other expenses arising under or in connection with the Junior Lien Term Loan Facility, governing the 6.875% senior secured junior lien notes due in 2031;
·
fees and other expenses arising under or in connection with the Company's 7.150% debentures due in 2027; and
·
fees and other expenses arising under or in connection with the Company's 6.875% debentures due in 2029;
The instruments and agreements relating to the Debt Instruments described above provide that as a result of the commencement of the Chapter 11 Cases, the principal amount, together with accrued and unpaid interest thereon, and in case of the indebtedness outstanding under each of the indentures described above, premium, if any, thereon, shall be immediately due and payable. Any efforts to enforce payment obligations under the Debt Instruments are automatically stayed as a result of the filing of the Chapter 11 Cases and the creditors' rights of enforcement in respect of the debt instruments are subject to the applicable provisions of the Bankruptcy Code.
Item 7.01 Regulation FD Disclosure.
Ongoing Negotiations on Proposed Plan of Reorganization
The Chapter 11 filing provides immediate protection to the Company, which will
continue to operate in the ordinary course of business as it pursues approval of
a proposed restructuring plan with its secured lenders, bondholders, and the
In summary, the Company's proposed plan of reorganization, which has been submitted to creditors for approval, provides:
· The Company's existing First Lien Notes will be exchanged for new first lien
notes in an amount not more than a principal balance of$217.9M , secured by the same collateral, having the same maturity and accruing interest at a rate of 10% per annum;
· The Company's largest holder of secured debt, including First Lien Notes, the
loans made under the Company's Junior Lien Term Loan Credit Agreement dated as ofJuly 16, 2018 (the "Second Lien Term Loans"), and the 6.875% Senior Secured Junior Lien Notes due 2031 (the Third Lien Notes") will receive$81 million of secured debt subordinate to the new first lien notes in exchange for a portion of its existing First Lien Notes and a commitment to provide the Company with$30 million of exit financing (such subordinated debt to accrue payment-in-kind interest of 12.5% or cash-pay interest of 10%, depending on the Company's ratio of leverage to adjusted EBITDA);
· The Company's existing Second Lien Term Loans and Third Lien Notes will be
extinguished in exchange for 97% of the equity ownership of the Company, subject to dilution for management incentives and certain warrants for up to 2.5% of the equity ownership of the Company;
· Certain creditors who are no longer part of the Company's go-forward operations
will share, pro rata, in a pool of$3 million or warrants to acquire up to 2.5% of the equity ownership of the Company;
· The Company's existing equity will be cancelled; and
· The Company will seek the
qualified pension plan, and appoint PBGC as the plan's trustee. Under a plan termination, PBGC would continue to pay the Company's qualified pension plan participants their benefits, subject to federal statutory limits. Under current regulations, McClatchy believes that such a solution would not have an adverse impact on qualified pension benefits for substantially all plan participants. The Company proposes to settle its liabilities in connection with the qualified pension plan by paying PBGC$3.3 million each year for ten years and 3% of the equity ownership of the Company.
The terms of the Plan represent the Company's good faith proposal to restructure its existing obligations. As previously announced, the Company has been negotiating such proposals with its largest stakeholders for some time. Certain issues, summarized below, represent the most recent bargaining position of certain of those parties.
· First, while the PBGC has not indicated that it disputes that the qualified
pension satisfies the standards for termination, the PBGC has requested a materially larger stream of cash payments over ten years and a materially larger percentage of equity ownership in the Company in settlement of the PBGC's claims relating to termination of the qualified pension plan; and
· Second, the parties continue to negotiate the final details surrounding
governance and senior management.
In order to enhance the likelihood that the parties can achieve a consensual
resolution, McClatchy has requested that the
McClatchy has advised the NYSE American of the filing. Since the Company does not anticipate emerging as a public company, but rather as a private company, it expects the NYSE American and the Company will begin the process to remove its listing from the exchange.
The
The information being furnished in this Item 7.01 and in Exhibit 99.1 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filings made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.
Forward-Looking Statements
This Current Report on Form 8-K includes certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act. Such statements are subject to risks and
uncertainties that could cause results to differ materially from the Company's
expectations, including the following: risks and uncertainties relating to the
Chapter 11 Cases, including but not limited to, the Company's ability to obtain
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. Exhibit No. Description 10.1 Form of Debtor-in-Possession Credit Agreement, datedFebruary 12, 2020 , amongEncina Business Credit, LLC , as administrative agent for each member of theLender Group and the Bank Product Providers, the Company, as a debtor and debtor-in-possession, and certain of the Borrowers party thereto. 99.1 Press release datedFebruary 13, 2020 .
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