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McClatchy files bankruptcy

120 points by Jerry2 7y ago

toomuchtodo 7y ago
Dig deep into the article to understand that, while this was caused by burdensome pension obligations, politics was heavily at play (and federal legislation [Secure Act] spared other journalistic publications with similar pension obligations).
- seibelj 7y ago
  Pensions are going to cause enormous issues in the coming decades. Almost certainly taxpayers won't stomach paying for them, as happened in Detroit and smaller jurisdictions. Get ready for the implosion!
  - toomuchtodo 7y ago
    Taxpayers will. The PBGC will be backstopping these pensions as well (as mentioned in the article). The country can always general fund transfer and QE its way out of it anyway. https://www.pbgc.gov/ https://www.pbgc.gov/
    - coryrc 7y ago
      When the PBGC gets it, usually benefits are cut to more sustainable levels and can actually be paid based on the pool of available funds.
      - toomuchtodo 7y ago
        There's no reason as-is benefits couldn't have been sustainable if properly managed by the plan sponsor. It is not the pension participant's fault public policy failed them and did not properly account for the ability of the corp to default on its contract using BK law, nor required adequately funding the plan. There is no limit to available funds in an economy not on the gold standard. These aren't trillions of dollars in obligations (in the case of these smaller pension plans, not speaking about public pensions such as those in Illinois), and we've burned up a greater sum on air conditioning and lost cash payments in the middle east alone during conflicts. As long as you can get past the "moral hazard" folks and not impact the macro too much (ie inflation), you can get away with a lot when working with funny fiat money. This is part of what government exists to do, providing security to its citizens. A contract was made, and it should be kept (with pensioners coming first ahead of all other creditors).
        lotsofpulp 7y ago
        >public policy failed them and did not properly account for the ability of the corp to default on its contract using BK law. Public policy did account for it (ERISA and PPA), and provided for the PBGC to provide a limited backstop, although it's not possible to backstop so many failing pension plans due to erroneous investment return and population growth rate and mortality assumptions. >A contract was made, and it should be kept (with pensioners coming first ahead of all other creditors). They are ahead, but there's usually nothing left, and definitely nothing that could satisfy the requirements of a pension. Compounding is a hell of a force, and PPA 2006 didn't come into effect until too late. And anytime you enter into a transaction with someone, you are subject to counterparty risk, even the government. The US is lucky it has more capacity to print its way out than most countries.
        toomuchtodo 7y ago
        > Public policy did account for it (ERISA and PPA), and provided for the PBGC to provide a limited backstop, although it's not possible to backstop so many failing pension plans due to erroneous investment return and population growth rate and mortality assumptions. Then public policy did not account for it. > And anytime you enter into a transaction with someone, you are subject to counterparty risk, even the government. The US is lucky it has more capacity to print its way out than most countries. Print dollars, transfer from the general fund, or have the Fed start buying up equities and using the cashflow to fund any necessary benefits payments (a somewhat more adventurous twist on the Bank of Japan's role in that country's economy). It's the government's job to be the guarantor of last resort, and they have the tools available to do so.
        lotsofpulp 7y ago
        >Print dollars, transfer from the general fund, or have the Fed start buying up equities and using the cashflow to fund any necessary benefits payments (a somewhat more adventurous twist on the Bank of Japan's role in that country's economy). It's the government's job to be the guarantor of last resort, and they have the tools available to do so. This is already happening. Defined benefit pension funds and defined contribution pension funds (401k/IRAs) are all invested in the same place: the public stock market and real estate. That's why I think bailouts of public stock market values are basically guaranteed, as long as the US dollar remains relatively desirable. Individuals may or may not be bailed out, depending on their political power. As I mentioned in another comment, these pension recipients got bailed out because their members are important in elections: https://www.nytimes.com/2019/12/24/business/coal-miner-pensions-bailout.html https://www.nytimes.com/2019/12/24/business/coal-miner-pensi...
  - jagged-chisel 7y ago
    How common are pensions these days? None of my employers have offered pensions, just a 401k. Current employer is over a century old; seems they got savvy to the pension liability long ago.
    - chrisseaton 7y ago
      > None of my employers have offered pensions, just a 401k. A 401k is a pension isn't it? Just a defined-contribution pension instead of a defined-benefit pension. I get a pension at my large young tech company.
      - Cymen 7y ago
        No, a 401k is not a pension. A pension guarantees a certain amount at specified dates while a 401k is a way of purchasing securities for you to manage your own retirement and is subject to the returns of your investment choices. In other words, a pension is a guarantee of future income in which the pension offerer is on the hook to ensure they have the funds to deliver the pension while the 401k pushes all that responsibility on to you. My wording is probably off on some of that so an article like this one is probably helpful to flesh out the details: https://www.fool.com/retirement/2018/06/13/whats-the-difference-between-a-pension-and-a-401k.aspx https://www.fool.com/retirement/2018/06/13/whats-the-differe...
        deleted 7y ago
        [deleted]
        chrisseaton 7y ago
        > A pension guarantees a certain amount at specified dates That's specifically a defined benefit pension - just one type of pension. There are many other types of pension. My pension is basically just a big saving account my employer and I both pay into - it's a defined contribution pension.
        samatman 7y ago
        According to le Wik, IRAs and 401k plans are indeed defined-contribution pensions. https://en.wikipedia.org/wiki/Defined_contribution_plan#United_States https://en.wikipedia.org/wiki/Defined_contribution_plan#Unit...
  - Alex3917 7y ago
    > Almost certainly taxpayers won't stomach paying for them, as happened in Detroit and smaller jurisdictions. I mean we've been dealing with this for thousands of years already. A pension is basically just a loan from an employee to an employer. Back when jews had a monopoly on money lending in Europe, every year the townspeople had to decide whether they were going to pay back their loans or just kill all the jews in their town, or at least take their land and send them elsewhere. Most years they just paid back their loans as agreed, but then every few decades when the debt service got too high things tended to go sideways. The basic issue is that even after thousands of years, we still haven't really figured out what's equitable in terms of how debt should work. C.f.: https://youtu.be/AX7vyycyRCs?t=2908 https://youtu.be/AX7vyycyRCs?t=2908
    - adamsea 7y ago
      I feel to urge to add a little color to this statement. Let’s recall that, beyond whatever assertions the poster is making here, the countries in question didn’t allow Jewish people to practice other trades. “ The result of those occupational restrictions was to push Jews into marginal roles, considered socially inferior, such as tax and rent collecting and moneylending, which were tolerated as a "necessary evil".” https://en.m.wikipedia.org/wiki/Economic_antisemitism https://en.m.wikipedia.org/wiki/Economic_antisemitism But yeah our current system of debt - especially student debt - is messed up.
  - lotsofpulp 7y ago
    Taxpayers don't have a choice, it all depends on how influential the defined benefit pension recipients are. Most don't have sway for a federal government bailout, but some do. Recent example is the coal miners in West Virginia, which coincidentally happens to be a swing state for the presidential elections: https://www.nytimes.com/2019/12/24/business/coal-miner-pensions-bailout.html https://www.nytimes.com/2019/12/24/business/coal-miner-pensi...
    - ls612 7y ago
      >Recent example is the coal miners in West Virginia, which coincidentally happens to be a swing state for the presidential elections ??? WV was R+40 in 2016, there's no way it's a swing state .
      - lotsofpulp 7y ago
        Oops, my bad. They do have a Democrat senator, and they do have some pull with the current presidential administration, so they must have some way to leverage their political power. Perhaps it was a reward and incentive to continue for voting Republican. But the point is that whether or not you get bailed out depends on how much influence you have.
  - stefan_ 7y ago
    As the number of actual taxpayers declines (which is why "pensions are going to cause enormous issues in the coming decades") politicians will happily take up more debt to pay for it all. You know, Medicare.
  - sambull 7y ago
    This is why France is rioting right now.
function_seven 7y ago
It feels gross to see pensions listed among liabilities when a company is facing bankruptcy or ruin. Why aren't they protected and held separate from the company's finances? My (maybe naïve) view is that whatever pension benefits are accrued by an employee, should be paid into an annuity or similar, separate fund that is firewalled off from the assets of the employer. The choice whether to honor pension obligations or pay back debt holders shouldn't exist. The pension was already funded and is held somewhere else beyond the reach of creditors. (I'm not saying that the full dollar amount needs to be set aside today. Just an agreed-upon NPV of the future payouts for some standard actuarial retirement length.)
- seibelj 7y ago
  You are assuming these are defined-contribution plans. These by definition self-fund, as what gets paid out is directly related to what gets put in and the fund's performance. Problem pensions are defined-benefit, where regardless of the amount of inputs and fund performance, the payments are guaranteed. Even worse, most pensions in America assume 8% average annual return, which is absurd. The whole thing is a house of cards.
- SQueeeeeL 7y ago
  It's basically a way for a company to take out a loan and default on it with no liability. See GM, where they hooked employees with really fantastic deals and tore them up once they tried to cash them in
- deleted 7y ago
  [deleted]
- mobilefriendly 7y ago
  Please do some more research on this topic before making policy demands that are already current law. Pension obligations are what took the company down-- they were behind on paying into the pension fund.
  - arcticfox 7y ago
    I think the commenter was pretty explicit about their lack of knowledge on the subject. Their viewpoint is logical from first principles, but it seems like it's off-base in the facts. Would you mind elaborating a bit more on the 'current law' aspects? I think that would be more constructive than: 'do some more research on this topic before [commenting].' I also know nothing about this, but from reading the article and your comment, I'm confused how they arrived at this point of being $805 million behind in their pension obligations if current law is solid on this point. Maybe it took them down in the end, but shouldn't the intervention have happened far sooner?
mimixco 7y ago
TL;DR Owner of major newspapers in Miami, Kansas City, Fort Worth, and Sacramento files bankruptcy and prepares for takeover by $4B hedge fund.
SQueeeeeL 7y ago
Wait, is this good or bad, I would hope this means we end up with more LOCAL news, buy who knows
- take_a_breath 7y ago
  Local news is being hurt most of all. Statehouse reporters are down across the country according to PEW. ==Those papers lost a total of 164 full-time statehouse reporters—a decline of 35%—between 2003 and 2014.== https://www.journalism.org/2014/07/10/americas-shifting-statehouse-press/ https://www.journalism.org/2014/07/10/americas-shifting-stat...
- nillium 7y ago
  Just to hijack this comment for a moment -- we're a startup looking to make local news more profitable and sustainable -- and hopefully reaching a new audience that might not watch local TV news or subscribe to their local newspaper. If anyone is interested in helping the cause, please email me -- jared AT nillium DOT com . I would love to talk more.
- justin66 7y ago
  > I would hope this means we end up with more LOCAL news Large and mid-sized news companies consolidating and folding is part of a trend that does not involve growth of local newspapers. Those are failing too.
legitster 7y ago
> While we tried hard to avoid this step, there’s no question that the scale of our 75-year-old pension plan – with 10 pensioners for every single active employee Holy crap. I remember a person from a newspaper told me it was 3-1 for them, and I thought it was hyperbole.
- SkyMarshal 7y ago
  It’s insane to me that private businesses are strapped with the burden of running the country’s pension and healthcare systems. How on earth the US has managed to remain economically competitive under those circumstances is a miracle. These functions really need to be divorced from one’s employer, and either run independently via private industry, or via government. Especially in modern times when people job and career hop frequently.
  - tomrod 7y ago
    It did so by kicking the can down the road. When many of these were set up in the post-WWII economy the population was growing dramatically. As with most infrastructure, policy is often scoped to the needs of the current day and gets stale after a few years.
  - SketchySeaBeast 7y ago
    I think we can sum up the previous success of this model with two words: "Baby boomers". Edit: To be clear, I'm not saying "It's all baby boomers fault". It was a massive, prosperous workforce holding up a relatively small retired population. That huge workforce is only recently moving into retirement, causing a massive shift in retired/employed, which is causing problems.
  - lucb1e 7y ago
    > How on earth the US has managed to remain economically competitive Well after you're done working, you don't work anymore. So if a country spends zero on providing pensions, they are actually more economically competitive. Whether one would want to live there is another matter, but the lower income people have little money to move and build a life elsewhere and the higher income people can arrange a good future for themselves.
Waterluvian 7y ago
I discovered the concept of pensions managed by corporations when Sears Canada went under and a ton of people lost their pensions. I guess it's a pretty common thing. But it seems absolutely insane to me. Who in their right mind, given any choice on the matter, would want to lock their retirement into the existence and health of a corporation? Until I saw the Sears debacle occur, I thought everyone basically puts together RRSP (Canadian retirement tax havens, I think 401k?) accounts and rely on their required payments into the Canada Pension Plan. It's much less likely that the government or a bank will fail, and the bank, unlike Sears, is CDIC backed. I guess my question is: why do we allow companies to manage retirement funds?
- smabie 7y ago
  Pension plans don’t really make economic sense. Fortunately, private pensions will soon become a thing of the past. Of course, the only reason they ever were a thing was due to tax breaks, but that’s a different story.
  - ixtli 7y ago
    They don’t make economic sense when the only economic concern is to generate private wealth for the owner of the company and it shareholders at a consistent year-over-year rate. If your economic concern includes growing a middle class that is motivated to spend money and to take business risks then they make a lot of sense.
    - lotsofpulp 7y ago
      They don't make sense because calculations for pension liabilities require knowing economic conditions decades into the future. I have yet to come across someone that prescient.
      - apendleton 7y ago
        This is true for any way of providing for retirement, though. Eliminating pensions just transfers the risk from companies to individuals. It's clear why companies would want this, but not clear it's societally beneficial.
GCA10 7y ago
This is a surprisingly informative article, given that it was published by McClatchy itself. Nice to see that journalistic standards stay high, even in the middle of what must be a harrowing time for everyone there.
briandear 7y ago
Regarding pensions, I never understood why an employer or a government would have an obligation to pay for retirement. It would seem that The onus of saving for retirement would be on the person. Crazy talk, I know.
- lotsofpulp 7y ago
  It is on the employee. The employee chooses to accept an employer's promise to pay for retirement, in lieu of cash now (via choosing to work for that employer). Government on the other hand taxes income in order to pay for retirement and people don't have the ability to opt out, so of course they have an obligation to pay it.
- wmf 7y ago
  Financially it should have been a wash: either the company saves $X on your behalf in its pension plan or the company pays you $X extra salary for you to save. The benefit of the pension is the built-in discipline. Then we discovered that the financial aspect doesn't work.
- throwaway2048 7y ago
  pensions are a form of agreed upon compensation, what you agreed to doesn't change just because it becomes inconvenient for you. You are deriding how these people should have been "personally responsible", what about the responsibility of the corporate side of the equation?
davidw 7y ago
There are financial costs to not having good local news: https://www.citylab.com/equity/2018/05/study-when-local-newspaper-close-city-bond-finances-suffer/561422/ https://www.citylab.com/equity/2018/05/study-when-local-news...
mzs 7y ago
They bought Knight Ridder and a lot of that culture permeated particularly in the DC bureau. I hope they come-out of this okay.
danso 7y ago
This has been a long time coming. In the mid aughts I worked at the Sacramento Bee, which is also the HQ for McClatchy Corporate. Every financial quarter the CEO would go into the newsroom and break the news of how print ad revenue was falling, but digital ads were looking promising, with double digit percentage increases, and that someday soon would make up the shortfall (most everyone in the industry knew, without knowing the denominators, how unlikely that was). What really screwed McClatchy over was that in 2006, it bought Knight-Ridder – then the 2nd biggest chain – for $4.5 billion [0]. Historically speaking, it wasn't the worst deal on the face of it. But in retrospect, McClatchy bought when the price was highest, though it managed to quickly sell off a dozen papers shortly after for not terrible prices [1]. So along with the declining ad revenue, the CEO would also talk about the massive debt he had just acquired, and the amount of interest we were paying each quarter, but how, once this "secular downturn" got stabilized, the new acquisitions would start paying for themselves. I left the Bee before the first big layoffs hit, but I remember people being mostly "whatever" at the time and putting it out of sight and out of mind. As a regular rank-and-file person, not much you can do or fuss about when the CEO is making billion dollar deals. [0] https://www.npr.org/templates/story/story.php?storyId=5260417 https://www.npr.org/templates/story/story.php?storyId=526041... [1] https://www.nytimes.com/2006/06/08/business/media/mcclatchy-sells-5-papers-bought-from-knight-ridder.html https://www.nytimes.com/2006/06/08/business/media/mcclatchy-...
Shebanator 7y ago
Love how they write an article about their own company's bankruptcy, complaining about pensioners and discusses getting out from under pension obligations as a purely good thing, and never once mentions the economic impact on those pensioners.
cityzen 7y ago
In 2017, Forman’s take-home pay from McClatchy was $1.7 million, excluding restricted stock. His newest contract with the company, dated January 25, 2019, includes a base pay of $1 million, a bonus of $1 million, and an additional $35,000 monthly stipend. According to Segal, this stipend will be used to pay for Forman’s travel, housing, office, and security expenses. This monthly stipend alone, which is up from $5,000 in his previous contract, could fund several reporters’ salaries every year. “The CEO’s compensation is set by the board of directors using public consultants and comparable,” Forman tells CJR over the phone.
smkellat 7y ago
I’m glad I dumped my shares before they wind up being canceled. They only depreciated to being worth a sum total of USD$5.00, alas. Better than getting nothing.
apta 7y ago
Once again, we see why an interest and inflation based economy is unsustainable. It's scary to think about what is going to happen in the future when it all implodes.
hindsightbias 7y ago
Stanford Public Pension tracker https://www.pensiontracker.org/ https://www.pensiontracker.org/

120 points by Jerry2 7y ago

Dig deep into the article to understand that, while this was caused by burdensome pension obligations, politics was heavily at play (and federal legislation [Secure Act] spared other journalistic publications with similar pension obligations).

seibelj 7y ago
Pensions are going to cause enormous issues in the coming decades. Almost certainly taxpayers won't stomach paying for them, as happened in Detroit and smaller jurisdictions. Get ready for the implosion!
- toomuchtodo 7y ago
  Taxpayers will. The PBGC will be backstopping these pensions as well (as mentioned in the article). The country can always general fund transfer and QE its way out of it anyway. https://www.pbgc.gov/ https://www.pbgc.gov/
  - coryrc 7y ago
    When the PBGC gets it, usually benefits are cut to more sustainable levels and can actually be paid based on the pool of available funds.
    - toomuchtodo 7y ago
      There's no reason as-is benefits couldn't have been sustainable if properly managed by the plan sponsor. It is not the pension participant's fault public policy failed them and did not properly account for the ability of the corp to default on its contract using BK law, nor required adequately funding the plan. There is no limit to available funds in an economy not on the gold standard. These aren't trillions of dollars in obligations (in the case of these smaller pension plans, not speaking about public pensions such as those in Illinois), and we've burned up a greater sum on air conditioning and lost cash payments in the middle east alone during conflicts. As long as you can get past the "moral hazard" folks and not impact the macro too much (ie inflation), you can get away with a lot when working with funny fiat money. This is part of what government exists to do, providing security to its citizens. A contract was made, and it should be kept (with pensioners coming first ahead of all other creditors).
      - lotsofpulp 7y ago
        >public policy failed them and did not properly account for the ability of the corp to default on its contract using BK law. Public policy did account for it (ERISA and PPA), and provided for the PBGC to provide a limited backstop, although it's not possible to backstop so many failing pension plans due to erroneous investment return and population growth rate and mortality assumptions. >A contract was made, and it should be kept (with pensioners coming first ahead of all other creditors). They are ahead, but there's usually nothing left, and definitely nothing that could satisfy the requirements of a pension. Compounding is a hell of a force, and PPA 2006 didn't come into effect until too late. And anytime you enter into a transaction with someone, you are subject to counterparty risk, even the government. The US is lucky it has more capacity to print its way out than most countries.
        toomuchtodo 7y ago
        > Public policy did account for it (ERISA and PPA), and provided for the PBGC to provide a limited backstop, although it's not possible to backstop so many failing pension plans due to erroneous investment return and population growth rate and mortality assumptions. Then public policy did not account for it. > And anytime you enter into a transaction with someone, you are subject to counterparty risk, even the government. The US is lucky it has more capacity to print its way out than most countries. Print dollars, transfer from the general fund, or have the Fed start buying up equities and using the cashflow to fund any necessary benefits payments (a somewhat more adventurous twist on the Bank of Japan's role in that country's economy). It's the government's job to be the guarantor of last resort, and they have the tools available to do so.
        lotsofpulp 7y ago
        >Print dollars, transfer from the general fund, or have the Fed start buying up equities and using the cashflow to fund any necessary benefits payments (a somewhat more adventurous twist on the Bank of Japan's role in that country's economy). It's the government's job to be the guarantor of last resort, and they have the tools available to do so. This is already happening. Defined benefit pension funds and defined contribution pension funds (401k/IRAs) are all invested in the same place: the public stock market and real estate. That's why I think bailouts of public stock market values are basically guaranteed, as long as the US dollar remains relatively desirable. Individuals may or may not be bailed out, depending on their political power. As I mentioned in another comment, these pension recipients got bailed out because their members are important in elections: https://www.nytimes.com/2019/12/24/business/coal-miner-pensions-bailout.html https://www.nytimes.com/2019/12/24/business/coal-miner-pensi...
- jagged-chisel 7y ago
  How common are pensions these days? None of my employers have offered pensions, just a 401k. Current employer is over a century old; seems they got savvy to the pension liability long ago.
  - chrisseaton 7y ago
    > None of my employers have offered pensions, just a 401k. A 401k is a pension isn't it? Just a defined-contribution pension instead of a defined-benefit pension. I get a pension at my large young tech company.
    - Cymen 7y ago
      No, a 401k is not a pension. A pension guarantees a certain amount at specified dates while a 401k is a way of purchasing securities for you to manage your own retirement and is subject to the returns of your investment choices. In other words, a pension is a guarantee of future income in which the pension offerer is on the hook to ensure they have the funds to deliver the pension while the 401k pushes all that responsibility on to you. My wording is probably off on some of that so an article like this one is probably helpful to flesh out the details: https://www.fool.com/retirement/2018/06/13/whats-the-difference-between-a-pension-and-a-401k.aspx https://www.fool.com/retirement/2018/06/13/whats-the-differe...
      - deleted 7y ago
        [deleted]
      - chrisseaton 7y ago
        > A pension guarantees a certain amount at specified dates That's specifically a defined benefit pension - just one type of pension. There are many other types of pension. My pension is basically just a big saving account my employer and I both pay into - it's a defined contribution pension.
      - samatman 7y ago
        According to le Wik, IRAs and 401k plans are indeed defined-contribution pensions. https://en.wikipedia.org/wiki/Defined_contribution_plan#United_States https://en.wikipedia.org/wiki/Defined_contribution_plan#Unit...
- Alex3917 7y ago
  > Almost certainly taxpayers won't stomach paying for them, as happened in Detroit and smaller jurisdictions. I mean we've been dealing with this for thousands of years already. A pension is basically just a loan from an employee to an employer. Back when jews had a monopoly on money lending in Europe, every year the townspeople had to decide whether they were going to pay back their loans or just kill all the jews in their town, or at least take their land and send them elsewhere. Most years they just paid back their loans as agreed, but then every few decades when the debt service got too high things tended to go sideways. The basic issue is that even after thousands of years, we still haven't really figured out what's equitable in terms of how debt should work. C.f.: https://youtu.be/AX7vyycyRCs?t=2908 https://youtu.be/AX7vyycyRCs?t=2908
  - adamsea 7y ago
    I feel to urge to add a little color to this statement. Let’s recall that, beyond whatever assertions the poster is making here, the countries in question didn’t allow Jewish people to practice other trades. “ The result of those occupational restrictions was to push Jews into marginal roles, considered socially inferior, such as tax and rent collecting and moneylending, which were tolerated as a "necessary evil".” https://en.m.wikipedia.org/wiki/Economic_antisemitism https://en.m.wikipedia.org/wiki/Economic_antisemitism But yeah our current system of debt - especially student debt - is messed up.
- lotsofpulp 7y ago
  Taxpayers don't have a choice, it all depends on how influential the defined benefit pension recipients are. Most don't have sway for a federal government bailout, but some do. Recent example is the coal miners in West Virginia, which coincidentally happens to be a swing state for the presidential elections: https://www.nytimes.com/2019/12/24/business/coal-miner-pensions-bailout.html https://www.nytimes.com/2019/12/24/business/coal-miner-pensi...
  - ls612 7y ago
    >Recent example is the coal miners in West Virginia, which coincidentally happens to be a swing state for the presidential elections ??? WV was R+40 in 2016, there's no way it's a swing state .
    - lotsofpulp 7y ago
      Oops, my bad. They do have a Democrat senator, and they do have some pull with the current presidential administration, so they must have some way to leverage their political power. Perhaps it was a reward and incentive to continue for voting Republican. But the point is that whether or not you get bailed out depends on how much influence you have.
- stefan_ 7y ago
  As the number of actual taxpayers declines (which is why "pensions are going to cause enormous issues in the coming decades") politicians will happily take up more debt to pay for it all. You know, Medicare.
- sambull 7y ago
  This is why France is rioting right now.

function_seven 7y ago

It feels gross to see pensions listed among liabilities when a company is facing bankruptcy or ruin. Why aren't they protected and held separate from the company's finances? My (maybe naïve) view is that whatever pension benefits are accrued by an employee, should be paid into an annuity or similar, separate fund that is firewalled off from the assets of the employer. The choice whether to honor pension obligations or pay back debt holders shouldn't exist. The pension was already funded and is held somewhere else beyond the reach of creditors. (I'm not saying that the full dollar amount needs to be set aside today. Just an agreed-upon NPV of the future payouts for some standard actuarial retirement length.)

seibelj 7y ago
You are assuming these are defined-contribution plans. These by definition self-fund, as what gets paid out is directly related to what gets put in and the fund's performance. Problem pensions are defined-benefit, where regardless of the amount of inputs and fund performance, the payments are guaranteed. Even worse, most pensions in America assume 8% average annual return, which is absurd. The whole thing is a house of cards.
SQueeeeeL 7y ago
It's basically a way for a company to take out a loan and default on it with no liability. See GM, where they hooked employees with really fantastic deals and tore them up once they tried to cash them in
deleted 7y ago
[deleted]
mobilefriendly 7y ago
Please do some more research on this topic before making policy demands that are already current law. Pension obligations are what took the company down-- they were behind on paying into the pension fund.
- arcticfox 7y ago
  I think the commenter was pretty explicit about their lack of knowledge on the subject. Their viewpoint is logical from first principles, but it seems like it's off-base in the facts. Would you mind elaborating a bit more on the 'current law' aspects? I think that would be more constructive than: 'do some more research on this topic before [commenting].' I also know nothing about this, but from reading the article and your comment, I'm confused how they arrived at this point of being $805 million behind in their pension obligations if current law is solid on this point. Maybe it took them down in the end, but shouldn't the intervention have happened far sooner?

mimixco 7y ago

TL;DR Owner of major newspapers in Miami, Kansas City, Fort Worth, and Sacramento files bankruptcy and prepares for takeover by $4B hedge fund.

SQueeeeeL 7y ago

Wait, is this good or bad, I would hope this means we end up with more LOCAL news, buy who knows

take_a_breath 7y ago
Local news is being hurt most of all. Statehouse reporters are down across the country according to PEW. ==Those papers lost a total of 164 full-time statehouse reporters—a decline of 35%—between 2003 and 2014.== https://www.journalism.org/2014/07/10/americas-shifting-statehouse-press/ https://www.journalism.org/2014/07/10/americas-shifting-stat...
nillium 7y ago
Just to hijack this comment for a moment -- we're a startup looking to make local news more profitable and sustainable -- and hopefully reaching a new audience that might not watch local TV news or subscribe to their local newspaper. If anyone is interested in helping the cause, please email me -- jared AT nillium DOT com . I would love to talk more.
justin66 7y ago
> I would hope this means we end up with more LOCAL news Large and mid-sized news companies consolidating and folding is part of a trend that does not involve growth of local newspapers. Those are failing too.

legitster 7y ago

> While we tried hard to avoid this step, there’s no question that the scale of our 75-year-old pension plan – with 10 pensioners for every single active employee Holy crap. I remember a person from a newspaper told me it was 3-1 for them, and I thought it was hyperbole.

SkyMarshal 7y ago
It’s insane to me that private businesses are strapped with the burden of running the country’s pension and healthcare systems. How on earth the US has managed to remain economically competitive under those circumstances is a miracle. These functions really need to be divorced from one’s employer, and either run independently via private industry, or via government. Especially in modern times when people job and career hop frequently.
- tomrod 7y ago
  It did so by kicking the can down the road. When many of these were set up in the post-WWII economy the population was growing dramatically. As with most infrastructure, policy is often scoped to the needs of the current day and gets stale after a few years.
- SketchySeaBeast 7y ago
  I think we can sum up the previous success of this model with two words: "Baby boomers". Edit: To be clear, I'm not saying "It's all baby boomers fault". It was a massive, prosperous workforce holding up a relatively small retired population. That huge workforce is only recently moving into retirement, causing a massive shift in retired/employed, which is causing problems.
- lucb1e 7y ago
  > How on earth the US has managed to remain economically competitive Well after you're done working, you don't work anymore. So if a country spends zero on providing pensions, they are actually more economically competitive. Whether one would want to live there is another matter, but the lower income people have little money to move and build a life elsewhere and the higher income people can arrange a good future for themselves.

Waterluvian 7y ago

I discovered the concept of pensions managed by corporations when Sears Canada went under and a ton of people lost their pensions. I guess it's a pretty common thing. But it seems absolutely insane to me. Who in their right mind, given any choice on the matter, would want to lock their retirement into the existence and health of a corporation? Until I saw the Sears debacle occur, I thought everyone basically puts together RRSP (Canadian retirement tax havens, I think 401k?) accounts and rely on their required payments into the Canada Pension Plan. It's much less likely that the government or a bank will fail, and the bank, unlike Sears, is CDIC backed. I guess my question is: why do we allow companies to manage retirement funds?

smabie 7y ago
Pension plans don’t really make economic sense. Fortunately, private pensions will soon become a thing of the past. Of course, the only reason they ever were a thing was due to tax breaks, but that’s a different story.
- ixtli 7y ago
  They don’t make economic sense when the only economic concern is to generate private wealth for the owner of the company and it shareholders at a consistent year-over-year rate. If your economic concern includes growing a middle class that is motivated to spend money and to take business risks then they make a lot of sense.
  - lotsofpulp 7y ago
    They don't make sense because calculations for pension liabilities require knowing economic conditions decades into the future. I have yet to come across someone that prescient.
    - apendleton 7y ago
      This is true for any way of providing for retirement, though. Eliminating pensions just transfers the risk from companies to individuals. It's clear why companies would want this, but not clear it's societally beneficial.

GCA10 7y ago

This is a surprisingly informative article, given that it was published by McClatchy itself. Nice to see that journalistic standards stay high, even in the middle of what must be a harrowing time for everyone there.

briandear 7y ago

Regarding pensions, I never understood why an employer or a government would have an obligation to pay for retirement. It would seem that The onus of saving for retirement would be on the person. Crazy talk, I know.

lotsofpulp 7y ago
It is on the employee. The employee chooses to accept an employer's promise to pay for retirement, in lieu of cash now (via choosing to work for that employer). Government on the other hand taxes income in order to pay for retirement and people don't have the ability to opt out, so of course they have an obligation to pay it.
wmf 7y ago
Financially it should have been a wash: either the company saves $X on your behalf in its pension plan or the company pays you $X extra salary for you to save. The benefit of the pension is the built-in discipline. Then we discovered that the financial aspect doesn't work.
throwaway2048 7y ago
pensions are a form of agreed upon compensation, what you agreed to doesn't change just because it becomes inconvenient for you. You are deriding how these people should have been "personally responsible", what about the responsibility of the corporate side of the equation?

davidw 7y ago

There are financial costs to not having good local news: https://www.citylab.com/equity/2018/05/study-when-local-newspaper-close-city-bond-finances-suffer/561422/ https://www.citylab.com/equity/2018/05/study-when-local-news...

mzs 7y ago

They bought Knight Ridder and a lot of that culture permeated particularly in the DC bureau. I hope they come-out of this okay.

danso 7y ago

This has been a long time coming. In the mid aughts I worked at the Sacramento Bee, which is also the HQ for McClatchy Corporate. Every financial quarter the CEO would go into the newsroom and break the news of how print ad revenue was falling, but digital ads were looking promising, with double digit percentage increases, and that someday soon would make up the shortfall (most everyone in the industry knew, without knowing the denominators, how unlikely that was). What really screwed McClatchy over was that in 2006, it bought Knight-Ridder – then the 2nd biggest chain – for $4.5 billion [0]. Historically speaking, it wasn't the worst deal on the face of it. But in retrospect, McClatchy bought when the price was highest, though it managed to quickly sell off a dozen papers shortly after for not terrible prices [1]. So along with the declining ad revenue, the CEO would also talk about the massive debt he had just acquired, and the amount of interest we were paying each quarter, but how, once this "secular downturn" got stabilized, the new acquisitions would start paying for themselves. I left the Bee before the first big layoffs hit, but I remember people being mostly "whatever" at the time and putting it out of sight and out of mind. As a regular rank-and-file person, not much you can do or fuss about when the CEO is making billion dollar deals. [0] https://www.npr.org/templates/story/story.php?storyId=5260417 https://www.npr.org/templates/story/story.php?storyId=526041... [1] https://www.nytimes.com/2006/06/08/business/media/mcclatchy-sells-5-papers-bought-from-knight-ridder.html https://www.nytimes.com/2006/06/08/business/media/mcclatchy-...

Shebanator 7y ago

Love how they write an article about their own company's bankruptcy, complaining about pensioners and discusses getting out from under pension obligations as a purely good thing, and never once mentions the economic impact on those pensioners.

cityzen 7y ago

In 2017, Forman’s take-home pay from McClatchy was $1.7 million, excluding restricted stock. His newest contract with the company, dated January 25, 2019, includes a base pay of $1 million, a bonus of $1 million, and an additional $35,000 monthly stipend. According to Segal, this stipend will be used to pay for Forman’s travel, housing, office, and security expenses. This monthly stipend alone, which is up from $5,000 in his previous contract, could fund several reporters’ salaries every year. “The CEO’s compensation is set by the board of directors using public consultants and comparable,” Forman tells CJR over the phone.

smkellat 7y ago

I’m glad I dumped my shares before they wind up being canceled. They only depreciated to being worth a sum total of USD$5.00, alas. Better than getting nothing.

apta 7y ago

Once again, we see why an interest and inflation based economy is unsustainable. It's scary to think about what is going to happen in the future when it all implodes.

hindsightbias 7y ago

Stanford Public Pension tracker https://www.pensiontracker.org/ https://www.pensiontracker.org/