Tuesday, November 18, 2008

Whistling past the graveyard?... McClatchy exec brags about renegotiating debt prior to collapse of finance market

Pat Talamantes, VP of Finance at McClatchy, says he is thrilled about McClatchy's great timing when the company renegotiated its debt prior to the collapse of the finance market.

The parent of The Miami Herald, The Sacramento Bee, and many other papers renegotiated its credit facility just days before the early October crash of stock and credit markets. It was forced to pay higher interest and put up more collateral, and it caught more flak from ratings firms. But the timing was fortuitous, notes McClatchy CFO/Vice President of Finance Patrick J. Talamantes."

As a result of that, we aren't seeing any issue from the current crisis," he says. "We got it done right in the middle of everything, and we were very thankful to get it done when we did."

Talamantes forgot to mention MNI's stock could be worthless, circulation is shrinking, and ad revenue has collapsed. Not to mention the renegotiation means McClatchy's business decisions are now made with the bankers in mind. Other than that, re-negotiating McClatchy's debt was awesome!


Anonymous said...

What's to brag about? They got to pay higher interest rates on a larger debt, and agreed to restrictions that scrap the dividend that has been holding up the stock prices. The downside of this new financial agreement is going to become clear quickly at the end of December, when the consequences of failing to get Christmas revenues as budgeted will appear. The legal requirements of the new loan will then appear, as the dividend will be scrapped, and MNI will be forced to consider more draconian cost-cutting measures, more layoffs, and perhaps even newspaper closings in order to meet the terms of the agreement. Sacto is patting itself on the back for making a pact with the devil on this agreement. I expect it will be the cause of forcing MNI into bankruptcy, probably by March according to my projections. Anyone familiar with this business knows newspapers make their revenues in the 4th quarter. When it doesn't show up, it's similar to the years when monsoons don't show up in Asia: no crops, famine and disaster for those on the lowest rungs of society.

Anonymous said...

Bankruptcy might be the only way of saving the newspapers. Chapter 11 gives 18 months of relief from debts in order to restructure. The economy should have recovered sufficiently by then for the newspapers to get some new revenue.