McClatchy CEO Pruitt: Speculation About Privatization Or Refinancing 'Incorrect'

By: Mark Fitzgerald McClatchy Co. Chairman and CEO Gary Pruitt -- responding directly for the first time Wednesday to the industry and investor speculation touched off by his resignation from several McClatchy family stock trusts -- emphatically denied the move presaged taking the chain private or refinancing its $2.1 billion in debt.

"This was my independent decision and it should not be read as a precursor to any move by the company or McClatchy family, including taking the company private or altering its capital structure," Pruitt said in a statement. "Any statements or speculation to the contrary are incorrect."

Since McClatchy Co. disclosed in an unpublicized after-hours filing Friday with the Securities and Exchange Commission that Pruitt last week resigned from four trusts that control 40% of the company through non-trading super-voting shares, Wall Street analysts and newspaper industry bloggers have puzzled over what the action signified.

The company maintained Pruitt made the decision on his own as a matter of good corporate governance.

Analysts, though, have persisted in saying there's more to it than that. One train of thought was that Pruitt, who has a fiduciary duty to act in the best interests of all shareholders and not just McClatchy family stakeholders, was stepping aside to clear the way for the family to lead a going-private deal.

What apparently provoked Pruitt to respond directly, in a statement issued Wednesday afternoon about 90 minutes before the close of trading, was an item in the "Heard on the Street" column first published Tuesday on The Wall Street Journal's Web site, and then in Wednesday's print editions.

Under the headline "A Grim Sign for McClatchy Shareholders?," Martin Peers wrote that Pruitt's resignation was an "an ominous sign" that could herald a painful deal for McClatchy's long-suffering shareholders. Peers dismissed the idea that McClatchy might go private, instead speculating that the company was more likely to make a refinancing deal that " would dilute or even wipe out the remaining equity value."

While McClatchy has so far easily covered interest payments with its EBITDA (earnings before interest, taxes, depreciation, and amortization), Peers added, if ad revenue continues to deteriorate, "it won't be long before McClatchy can't cover its interest bill."

In Wednesday's statement, Pruitt stoutly denied anything but good governance was involved in his decision to resign, and name as his replacement Leroy Barnes Jr., a longtime company director who is not a McClatchy family member.

Here's Pruitt's statement in full:

"I have been one of four trustees of these trusts for the past five years and it has always been my intent to name a successor trustee to replace me," Pruitt said. Last week Pruitt named McClatchy board member Leroy Barnes, Jr. as his successor trustee. "Given Leroy's tenure on our board, his financial expertise and his working relationship with McClatchy family members, I felt it was the right time to make this transition. This was my independent decision and it should not be read as a precursor to any move by the company or McClatchy family, including taking the company private or altering its capital structure. Any statements or speculation to the contrary are incorrect. The company is working hard to navigate this period of transition in our in industry and we are continuing to make good progress on a number of fronts. I remain confident of McClatchy's future success."