• by Erik Sass  @eriksass1, January 2, 2009

The embattled McClatchy Co., publisher of dozens of newspapers, including The Miami Herald, said it will have to delay the planned $190 million sale of a parking lot--a 10-acre parcel of land adjacent to the Herald's headquarters--because the buyer, Citisquare Group, hasn't been able to line up financing.

McClatchy remains hopeful that the deal will go through, so it is extending the closing date by six months to June 30, 2009. Still, the delay adds to the company's financial woes at a critical time; investors fear it may default on its substantial debt.

McClatchy has also been trying to sell the Miami Herald itself, but hasn't found any buyers. Like the planned sale of the parking lot, this is being hindered by the credit crunch, which has made banks leery of lending.

The planned land sale was supposed to yield $118 million after taxes, which McClatchy said it would use to pay down its roughly $2.1 billion debt. Pointing to its revolving line of credit, top financial executives said the delay won't affect McClatchy's ability to meet debt obligations coming due in April 2009.

But they did admit they were disappointed by the prospect of further borrowing, which means maintaining a higher level of debt. Investors seemed to agree, as McClatchy's stock price--already circling the drain--dropped even lower following the announcement on Wednesday, from $0.85 to $0.70. Subsequently, it rebounded slightly to just over a dollar on Friday.

In September, McClatchy renegotiated lending agreements covering $1.175 billion of its debt, meaning that about $900 million remains under the more aggressive repayment schedule. The next debt payment doesn't come due until June 2011, but if revenues continue to plunge, McClatchy will find it difficult to service this debt as well. Total revenues decreased 19.4% in November, and neither the economic downturn or the migration of print ad dollars to the Internet appear to be slowing, let alone reversing.

In December, Edward Atorino, an analyst with Benchmark Company, told The Wall Street Journal that the sharp drop in stock price last month (from $2.55 on Dec. 8 to $0.75 on Dec. 24) meant investors were concerned about the potential for default and bankruptcy.

McClatchy's real-estate deal, delayed by banks' unwillingness to lend, has fallen prey to the same external factors that hindered Tribune Co.'s attempts to sell the Chicago Cubs and Wrigley Field, as well as the headquarters of the Los Angeles Times and the Tribune Tower itself. Sam Zell, Tribune's new owner, planned to sell the Cubs and Wrigley Field to service Tribune's massive debt, but potential buyers could not line up funding, forcing Tribune to declare bankruptcy.