Bee parent McClatchy refinances its debt
By Dale Kasler dkasler@sacbee.com
By selling $875 million worth of bonds, The McClatchy Co. took a big step Thursday toward refinancing much of its debt and creating room to maneuver during a slump in advertising sales. The bond sale will allow The Bee’s owner to push back the due date on a significant chunk of its $1.95 billion debt. “It gives them some time,” said Shelly Lombard, a debt analyst at New York research firm Gimme Credit. The sale comes at a significant price. The new bonds carry an 11.5 percent interest rate, somewhat higher than analysts were expecting. Lombard said the rate reflects investors’ belief that the Sacramento newspaper chain continues to face tough times even though profits have improved lately. The rate is “not a great result for the company, (but) it’s good that they got the deal done,” said analyst Jake Newman of CreditSights in New York. Until recently, some Wall Street analysts believed McClatchy was going to default on its debt and file for bankruptcy protection. The company always denied that, but the refinance package, which McClatchy announced last week, makes default far less likely. Key to the refinance strategy is the bond sale. The $875 million will be used to retire some existing bank and bond debt that’s maturing over the next four years. When the dust settles, McClatchy will push back the maturity on much of its debt to 2017, when the newly issued bonds come due. McClatchy hasn’t finished the refinance. It still must persuade holders of some of its existing bonds to sell their notes back so the debt can be erased. The company has sweetened the buyback offer. Under new terms announced Thursday, the company will pay $1.05 for every dollar of principal on $166 million in bonds maturing next year. The original offer was $1.02. A day earlier, McClatchy raised the offer for $24 million in bonds maturing in 2014. It’s now willing to pay around $1.34 for every dollar of principal. The first offer was $1.17. Lombard said both series of bonds carry “make whole” provisions guaranteeing investors certain sums if the bonds are retired early. As a result, Mc-Clatchy has to offer a premium to get bondholders to surrender the notes. The offer expires Tuesday. McClatchy shares closed at $5.02, down 31 cents, on the New York Stock Exchange. Call The Bee’s Dale Kasler, (916) 321-1066. Read his blog on the economy, Home Front, at www.sacbee.com/blogs.