McClatchy has 30 daily newspapers, including The Miami Herald and Fort Worth Star-Telegram.

McClatchy was offering to swap old notes representing a variety of debts (coming due in 2011, 2014, 2017, 2027, and 2029) for new notes at a discount of 70% of the value of the old note. The deal would also give creditors cash for some of the retired debt.

Essentially, the offer targeted creditors worried about the risk of default on the old notes, leveraging this concern to reduce the company's overall debt burden.

However, the creditor response was lukewarm.

While McClatchy was prepared to exchange old notes representing as much as $1.15 billion of its old debt, by the time the offer expired, creditors only ended up trading in about $103 million worth of old notes. In return, they received a total $24.2 million of new notes and cash payments of $3.4 million. This is considerably less than the $175 million of new notes and $60 million cash the company was prepared to hand over to retire the whole $1.15 billion debt.

The lack of interest among creditors could be a good thing or a bad thing. On one hand, it may signal that creditors don't believe there is an immediate threat of McClatchy defaulting on its debt -- a rare vote of confidence in the beleaguered newspaper business. On the other hand, they may have quietly arranged insurance for their debts in the form of credit swap defaults, in which case, it would mean the opposite -- that they believe a default to be likely and are hoping to collect more money on their default insurance.

Like its peers, McClatchy has found it harder and harder to renegotiate its lending agreements against an ominous backdrop of plunging ad revenues. Indeed, three other newspaper publishers carrying large amounts of debt from M&A activity have already declared bankruptcy this year: the Tribune Co. followed by Journal Register Co. and Philadelphia Media Holdings.

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