Commentary

Pandemic Relief May Change Pension Equation For McClatchy

McClatchy will benefit from the government's next COVID-19 aid package for businesses if it's broadened to provide pension relief to more newspapers. The measure may help McClatchy to emerge from bankruptcy in a stronger financial position, though it's still too early to tell how the publisher will be reorganized in a court-approved process.
Democrat lawmakers in the House of Representatives are said to be working on a plan to broaden a pension relief law passed in December that didn't include McClatchy, according to a report by Roll Call, which cites industry sources and people familiar with the talks.
The expanded pension relief would be tucked into the government's next emergency package, dubbed "CARES 2," as a sequel to the $2.2 trillion CARES Act adopted in late March. It's unclear when CARES 2 will be enacted as the House is currently out of session and not set to return until later this month, at the earliest.

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The pension relief will give newspaper publishers 30 years to fix underfunded pensions, compared with the seven years granted to other companies, and permit employers to forecast that pension investments have a yearly return of 8% a year, Roll Call reported. Both measures give more financial leeway to cash-strapped publishers -- though an 8% return is a lofty goal that may be unrealistic.   

Unlike last year's pension relief measure that generally excluded publicly traded companies, the next bill will have an exception that basically singles out McClatchy. That's right, "a public company that is majority-owned by a family is eligible as long as none of its papers are delivered in more than five states," according to Roll Call's report.
It's too early to tell whether the proposal will survive in a final version that reaches President Trump's desk, and whether it will change the complex dynamics of McClatchy's reorganization.
Rick Edmonds, the media business analyst for Poynter, has an excellent summary of the many issues that need to be resolved with a hearing scheduled for Wednesday. McClatchy and the Pension Benefit Guaranty Corp., the federal agency that maintains private-sector pension funds at struggling companies, need to settle their differences as part of any proposed reorganization.
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