<figure>
 <img src="https://media.eaglewebservices.com/public/2020/7/1594678126879.png" alt="The Kansas City Star staff moved from its historic quarters at 1729 Grand into new space in its printing plant across McGee Street, pictured here, two years ago. Wikimedia Commons/Kansas City Star" />
 <figcaption>The Kansas City Star staff moved from its historic quarters at 1729 Grand into new space in its printing plant across McGee Street, pictured here, two years ago. Wikimedia Commons/Kansas City Star</figcaption>
 </figure>By DAN MARGOLIES <a href="https://www.kcur.org/news/2020-07-13/with-deal-for-mcclatchy-kansas-city-star-will-see-its-fifth-owner-in-four-decades">Kansas News Service</a>The McClatchy Company, the nation’s second largest newspaper chain 
and the owner of The Kansas City Star, Wichita Eagle, Miami Herald, 
Charlotte Observer and more than two dozen other daily newspapers, 
announced on Sunday that Chatham Asset Management had submitted the 
winning bid for the company at a bankruptcy auction.McClatchy, 
burdened by debt it incurred in 2006 when it bought newspaper chain 
Knight Ridder for $4.5 billion and by pension obligations to 24,000 
employees and retirees, sought Chapter 11 protection in February in the 
Southern District of New York.Who is Chatham Asset Management?Chatham
 is a $4.4 billion hedge fund based in New Jersey. It is McClatchy’s 
biggest creditor and shareholder. The company, which was founded in 
2002, is secretive; its managing partner, Anthony Melchiorre, a one-time
 head of Morgan Stanley’s junk bond trading division, almost never 
grants interviews.<a href="https://fortune.com/2019/03/18/chatham-asset-management-michael-cohen-ipayment-holidings-lawsuit/" target="_blank">In a profile of Chatham last year</a>,
 Fortune magazine said that during his stint at Morgan Stanley, 
Melchiorre “could be foul-mouthed and loud, and would berate fellow 
traders as he bopped around the trading floor in his stocking feet.”Chatham
 already has investments in a stable of newspapers. It is a major 
shareholder of the publisher of several Canadian papers, including The 
Montreal Gazette, The Ottawa Citizen and The National Post. It also owns
 a major stake in American Media Inc., the parent company of The 
National Enquirer supermarket tabloid.McClatchy entered into a 
debt refinancing deal with Chatham in 2018 that unsecured creditors of 
McClatchy claim unfairly benefited Chatham. A recent report by a law 
firm charged with investigating the matter concluded that McClatchy did 
not act improperly when it refinanced the debt, and did not give 
favorable treatment to Chatham.What happens next?U.S.
 Bankruptcy Judge Michael E. Wiles of the Southern District of New York,
 where McClatchy filed for bankruptcy, must approve the sale. He is 
expected to rule after a hearing set for July 24. The deal also must 
pass muster with the U.S. Justice Department, which will review it for 
antitrust issues.The sale will allow McClatchy to emerge from 
Chapter 11, having restructured its debt and pension obligations, but 
ends its family ownership of newspapers dating back to 1857, when James 
McClatchy founded the Sacramento Bee during the California Gold Rush.McClatchy
 said it would contribute $1.4 billion in pension assets to the federal 
Pension Benefit Guaranty Corporation fund and expects the PBGC, which 
takes over pensions of troubled companies, to assume McClatchy’s 
qualified pension plan.Why would a hedge fund be interested in owning newspapers?For
 the last decade, hedge funds and private equity firms have been buying 
up media companies, which they’ve been able to snatch up at fire sale 
prices because of their declining circulation and ad revenues. Once 
acquired, they typically cut costs by slashing reporting staffs, with 
the idea of eventually selling the companies at a profit.Journalists
 tend to see them as financial predators focused on short-term profits, 
with little interest in the idea of journalism as a public trust. Alden 
Global Capital, a New York-based hedge fund, has become notorious as the
 face of rapacious newspaper-devouring hedge funds, having acquired 
newspapers like the Denver Post and cut their reporting staffs to the 
bone.Were there any other bidders for McClatchy?Chatham
 was the only publicly identified bidder until Alden challenged 
Chatham’s bid in court last Wednesday. McClatchy says “multiple bidders”
 submitted bids by the July 1 deadline but has not identified them.Chatham
 submitted its bid a few months ago, establishing a floor for other 
bids. McClatchy’s board of directors must still approve the Chatham 
deal, but that’s expected to be a formality that will take place this 
week.What will happen to McClatchy’s newspapers if the sale to Chatham is approved?All
 of McClatchy’s newspapers will become the property of Chatham, which 
can do with them as it sees fit. McClatchy was a publicly traded 
company; with the sale, the newspapers will be owned by a privately held
 company. That means the general public will no longer have access to 
the kind of detailed corporate information publicly traded companies are
 required to file.This isn’t the first change of ownership for The Kansas City Star, right?In
 fact, it will be the fifth for The Star since 1977, when Capital Cities
 Inc. bought the newspaper, which was then owned by its employees, for 
$125 million. Not long after Capital Cities bought the ABC television 
network, the Walt Disney Co. acquired Capital in 1996.Disney had 
no interest in owning newspapers, however, so in 1997 it sold The Star 
and a handful of other newspapers it had acquired as part of the Capital
 Cities deal to Knight Ridder, a traditional newspaper company.Nearly
 two decades later, under shareholder pressure to raise its stock price,
 Knight Ridder sold all of its newspapers in 2006, more than two dozen 
in all, to McClatchy for $4.5 billion.The timing proved to be 
bad. Two years later, the U.S. descended into a steep recession, which 
led to a severe contraction in newspaper advertising. And the internet 
had already begun eating into newspapers’ biggest sources of revenue: 
classified and display advertising. The combined blows proved 
debilitating. Between 2004 and 2018, more than 1,800 newspapers across 
the United States disappeared. And since 2008, <a href="https://www.pewresearch.org/fact-tank/2020/04/20/u-s-newsroom-employment-has-dropped-by-a-quarter-since-2008/#:~:text=Between%202008%20and%202014%2C%20the,over%20the%20five%2Dyear%20period." target="_blank">newsroom employment has fallen by half</a>.The
 Kansas City Star newsroom once boasted nearly 300 employees. It’s about
 a quarter of that number today. The Wichita Eagle has seen a similar 
drop in numbers.Dan Margolies is senior reporter and editor at KCUR. He can be reached by email at dan@kcur.org or on Twitter @DanMargolies.&nbsp;

Hedge fund set to take over ownership of Kansas City Star