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Newsmakers

Under New Ownership, McClatchy Could Offload $1.4 Billion Pension Assets to PBGC

The bankrupt newspaper chain’s retirement obligations propelled it into Chapter 11, but the new owner, hedge fund Chatham, will get a clean slate.
By Sarah Min


After New Jersey-based hedge fund Chatham Asset Management won the auction for bankrupt newspaper company McClatchy, the publisher could offload its $1.4 billion qualified pension plan to the Pension Benefit Guaranty Corporation (PBGC). 

McClatchy, which said it will remain a whole company after restructuring its debt and pension obligations, will transition out of Chapter 11 protection in the third quarter, the company said Sunday.

“Our aim was to permanently address both the company’s legacy debt and pension obligations and strengthen our balance sheet in order to provide greater certainty and stability to the wider group of our colleagues and stakeholders who benefit from a restructured McClatchy,” Craig Forman, president and chief executive of McClatchy, said in a statement. 

“We’re pleased that Chatham and the supportive secured first-lien creditors believe in our business and our mission and are helping to achieve these goals,” Forman added. 

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Terms of the deal were not disclosed. Stock price for McClatchy is up 4% to just 13 cents per share since trading closed on Friday.

McClatchy, the second largest local newspaper company in the US, owns media companies across 30 communities. It owns notable titles, such as the Miami Herald, which recently won praise and a 2018 Polk Award for its coverage of the Jeffrey Epstein scandal. 

But its pension deficit had pushed the company into bankruptcy. In December, the newspaper company had $535 million in pension and post-retirement obligations, according to filings. It held roughly $115 million in assets. 

Chatham also owns American Media, which publishes the National Enquirer. It also has a majority stake in Postmedia Network Canada, the largest news publisher of daily newspapers in Canada. 

The agreement is subject to court confirmation, expected this month. 

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Home > News > Market Moves > ESG-Friendly Stocks Have Done Better in Virus Downturn, BofA Says
Market Moves

ESG-Friendly Stocks Have Done Better in Virus Downturn, BofA Says

‘A bear market necessity’: Higher employee satisfaction is critical factor, the study concludes.
By Larry Light


If you invest with environmental, social, and governance (ESG) goals in mind, you may do good, but you won’t do well. That’s the thesis behind the Department of Labor (DOL)’s proposed curb on corporate and other private defined benefit (DB) pension plans investing in stocks with high ESG scores.

But a Bank of America (BofA) research report begs to differ. ESG portfolios have logged superior performance over others, the banks’ analysts concluded, especially during the coronavirus economic slump.

“ESG is a bear market necessity, not a bull market luxury,” the report concluded. Lately, it said, exchanged-traded funds (ETFs) overall have been hit by outflows, but ESG-oriented funds have had inflows.

Credit those better returns. ESG has outperformed by 5 to 10 percentage points in in the US and Europe since the stock market peak in mid-February, versus stocks with lower ESG scores, BofA found. The “S” is the biggest reason for that here.

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“Social factors (employee satisfaction, product safety, good workforce policies) appear to be driving” investor preferences now, the bank reasoned.

The conventional view of ESG investing, the report explained, is that stocks that followed its principals were “nice to have” and not a “need to have feature of investors’ noblesse oblige.” But that belief crumbles under scrutiny and particularly during a downturn, the bank argued.

One explanation for ESG’s better returns could be that energy stocks have done poorly this year, thus dragging down non-ESG portfolios. While that may be an influence, the report conceded, other forces were at work.

Companies with lower-ranked ESG scores in the US, Europe, and Asia have been hit with larger downward earnings revisions for this year and next. Why? A “track record of good employer/employee relations; safe, reliable branded products; and good workforce policies (including aspects like leave and child care)” have eased investors’ concerns—“more than good governance, which was most critical in the ’08-’09 financial crisis,” the report read.

Amid furloughs and layoffs, employee satisfaction makes for smoother running operations, BofA contended. Stocks with high Glassdoor.com ratings outpaced others by five points in the recent selloff, it added.

On the debt side, green bonds during the March credit crunch fell less than euro-denominated A-rated corporates. The same held true with emerging market sovereign debt. What’s more, the banks’ analysts wrote, “improving ESG often means improving credit stories—a critical factor in bear markets.”

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COVID-19 Creates New Factors for Due Diligence and ESG

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