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McClatchy, RR Donnelley pull off deals to owner Chatham Asset’s benefit

Chatham Asset Management emerged as a beneficiary of the recent opening in the high yield primary market, with the owner clinching favorable deals for portfolio names The McClatchy Company and RR Donnelley, according to two sources familiar with the situation.

McClatchy recently priced a USD 40m senior PIK toggle add-on to its existing USD 210m 11% cash/12.5% PIK notes due 2027, the sources said. Proceeds from the RBC-led offering paid a USD 30m distribution to Chatham and added USD 8m of cash to the borrower's balance sheet. 

The newspaper publisher paid a roughly USD 115m dividend payment to its equity holder from the original offering placed last October, according to a Moody's Investors Service report, in which it assigned a B3 rating to the bond.

The debt-funded issuances come just three years after a New York bankruptcy court judge signed off on a deal for Chatham to acquire the newspaper chain – previously run by a family – for UDS 263m in a credit bid of its first lien debt, plus USD 49m in cash and the assumption of additional liabilities. 

McClatchy filed for bankruptcy in February 2020, after it became unable to service its debt and pension obligations with an over-levered balance sheet.

Chatham-owned RR Donnelley, meanwhile, priced a junior lien secured offering upsized to USD 285m, from an initial USD 250m, via Jefferies this week. Proceeds from the deal – which carried a 95.3 OID and 9.75% coupon for an 11% yield – funded a take out of debt, including a portion of RR Donnelley's 10% PIK holdco notes due 2031 held by Chatham.

The printing company's new 9.75% notes due 2028 traded up on break and last changed hands at 99.25 with a 9.943% yield today, according to MarketAxess.

Chatham acquired RR Donnelley in an all-cash transaction valued at USD 2.3bn in February 2022, after beating an offer from Atlas Holdings.

Representatives from Chatham declined comment.