McClatchy Co. filed for voluntary Chapter 11 bankruptcy protection Thursday while it continues to seek support for a reorganization plan from key stakeholders, including the Pension Benefit Guaranty Corp.

In its bankruptcy announcement, the company said the goal is to emerge from the process in the next few months after resolving legacy debt and pension obligations. “We are moving with speed and focus to benefit all our stakeholders and our communities,” President and CEO Craig Forman said in the statement. “We expect there will be no adverse impact on qualified pension benefits for substantially all of the plan’s participants and beneficiaries.”

McClatchy disclosed in November that it was discussing having the PBGC take over its qualified defined benefit plan that was closed to new participants in 2009. It has $1.39 billion in assets including about $580 million in voluntary contributions made by McClatchy. As of March 31, the plan was underfunded by $535 million.

McClatchy will seek court permission to terminate the pension plan, transferring responsibility to the PBGC. The company has proposed settling its pension liabilities by paying PBGC $3.3 million annually for 10 years and giving it 3% of equity ownership.

The announcement noted that the PBGC has not disputed the plan’s qualification for termination but has requested “a materially larger stream of cash payments over 10 years and a materially larger percentage of equity ownership” to settle PBGC claims as an unsecured creditor.

A PBGC spokesman said in an emailed statement that “PBGC and McClatchy continue to engage in discussions to find the best path forward for the people covered under the company’s pension plan, as well as the millions of people in the other plans PBGC insures. As always, our goal is to protect the retirement security of workers and retirees.”

McClatchy has secured $50 million in debtor-in-possession working-capital financing to support operations at the company and 30 local newsrooms during the bankruptcy process, which involves the company and 53 wholly owned subsidiaries that have filed petitions in the U.S. Bankruptcy Court for the Southern District of New York, where an initial hearing will be held Friday. The company has asked the court to appoint an independent mediator to facilitate restructuring negotiations.

On its restructuring website, the company said approval of its proposal would eliminate 55% of its debt, including the pension obligations, and the company would transition majority ownership to hedge fund Chatham Asset Management LLC, a lender and shareholder.

Source: Pensions & Investments