McClatchy Co. is discussing having the Pension Benefit Guaranty Corp. take over its defined benefit plan as it struggles with a liquidity crisis, the Sacramento, Calif.-based company said in a third-quarter earnings report Wednesday.
In addition to discussing the possibility of terminating the plan and having the PBGC step in, McClatchy is talking with its largest debtholder "for the purpose of exploring other alternatives with respect to our qualified pension obligations, non-qualified pension obligations and capital structure," the company said in the report.
The IRS has already denied the company's application for a waiver from minimum required contributions for plan years 2019 through 2021. The plan, closed to new participants in 2009, has $1.32 billion in assets and as of March 31 is underfunded by $535 million. The $124 million in contributions due in 2020 "greatly exceeds the company's anticipated cash balances and cash flow given the size of its operations relative to the obligations due, and creates a significant liquidity challenge in 2020," the report said.
A PBGC spokesman said that while the agency is ready to step in if the company decides to terminate its pension plan, "PBGC strives to keep companies and pension plans together, which can include discussions to help them determine the best way to keep their pension plans going."
McClatchy President and CEO Craig Forman said in the report that it is also exploring "other means of pension relief including working productively with many members of Congress in search of legislative relief that would mitigate the burden of the minimum required contributions."
McClatchy is seeking to amend the proposed SECURE Act to make it eligible for relief currently available only to community newspapers. With the bill's passage uncertain, "the company and its advisers are exploring all available options to address these liquidity pressures," Mr. Forman said.
Mr. Forman noted that the company has voluntarily contributed nearly 44% of existing plan assets rather than limiting company contributions to the minimum amounts required, but the current workforce of nearly 2,800 employees represents about 1 in 10 beneficiaries, "and people who joined the company in the last 10 years do not participate in a plan they are working to support."
If the PBGC wound up taking over the plan, "the company believes … it would not have an adverse impact on qualified pension benefits for substantially all of its retirees," Mr. Forman said.
Talks with its debtholder center around several loan agreements that are secured by second and third liens on substantially all of the company's assets.
The company's goal is to reach a resolution by March 30, 2020. "There can be no assurance that the ongoing discussions with PBGC, its debtholder, and other parties will result in any restructuring transaction, that the company will obtain any required stakeholder consent to consummate a restructuring transaction, or that the restructuring transaction will occur on a timely basis or at all," the report said.