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Chatham Hedge Fund has the winning bid for McClatchy Newspapers

The transition to ownership of hedge funds is part of a growing trend in the news industry, much to the chagrin of media advocates who have argued that finance companies do not make good managers of a company that largely relies on holding the powerful to account.

Chatham is a major investor in Postmedia, the publisher of Canadian newspapers including the National Post, The Montreal Gazette and The Ottawa Citizen. It is also the principal owner of American Media Inc., the parent company of The National Enquirer supermarket.

Chatham is led by Anthony Melchiorre, a Chicago native who worked on Wall Street at Goldman Sachs and Morgan Stanley, where he led its garbage division. He founded his hedge fund in Chatham, NJ, in 2002. The company often takes the debts of struggling companies that still have good cash flow. American Media and McClatchy fit that profile.

McClatchy’s problems can be traced back to 2006, when it bought its much larger rival, Knight Ridder, then the second largest newspaper chain in the US, for $ 4.5 billion, plus the assumption of $ 2 billion in debt. From shortly after the merger to the end of 2018, McClatchy’s workforce went from more than 15,000 full-time employees to about 3,300, according to public filings.

McClatchy Chairman Kevin S. McClatchy, the great-grandson of its founder, has said that the company’s inability to meet its pension obligations tipped it into bankruptcy. The $ 1.4 billion pension plan, created 75 years ago, was intended to give money to more than 24,000 current and future retirees.

Like other hedge funds, Chatham has benefited from investing in distressed companies. It took a financial interest in McClatchy not long after the chain’s financial problems began.

Alden Global Capital, a New York hedge fund that has become a force in the news industry, had also expressed an interest in acquiring McClatchy during the recent hearings in the bankruptcy courts. It controls about 200 stores through its media chain, MediaNews Group. With a strategy that led to deep layoffs at The Denver Post and other MediaNews Group publications, Alden has managed to turn the profits of a company that seemed past its peak.

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