JimmyCsays: At the juncture of journalism and daily life in KC

This news falls into the “expect-the-unexpected” category.

The Chicago Tribune reported yesterday that McClatchy Co., The Star’s corporate owner, was one of two companies looking at acquiring the former Tribune Publishing group, which nows goes by the name Tronc.

Tronc owns 10 newspapers, including the Chicago Tribune, the Baltimore Sun, the Hartford Courant, the Orlando Sentinel and the South Florida Sun-Sentinel.

The Trib’s story is a head scratcher because every bit of speculation I’ve heard has been in the direction of whether debt-ridden McClatchy might consider selling out or if it might be headed toward bankruptcy.

To see a story, then, suggesting that McClatchy might be a buyer simply stifles the imagination.

But today I did a little digging, and I’d like to lay out a few facts that should put that seemingly fanciful prospect in proper context:

:: If McClatchy was involved in an acquisition — and it’s still a long way from taking place — McClatchy as we know it, a company that owns and operates 29 daily newspapers, would not be calling the shots.

:: Pulling the levers would be a hedge fund called Chatham Asset Management, Chatham, NJ, which over the last year has become McClatchy’s largest shareholder (20 percent) and biggest creditor. Institutional Investor magazine has described Chatham as a firm that invests in companies with “distressed debt.”

:: Five years ago, Chatham snapped up a majority ownership position in another deeply indebted media company, American Media Inc. If that name sounds familiar, it’s because it owns the National Enquirer, which has been in the news lately for having purchased the rights to, and then killing, sexual-dalliance stories that could have derailed Donald Trump’s presidential campaign.

:: Chatham’s managing partner is a shadowy figure named Anthony Melchiorre, a former junk bond trader at Morgan Stanley. (Standard & Poor’s lists 16 grades of “investment-grade” bonds, from AAA to B minus. After that come the junk bonds.)

:: Melchiorre ‘s partner in the American Media bailout was billionaire hedge fund manager Leon Cooperman, whom the U.S. Securities and Exchange Commission two years ago charged with insider trading. Last year, to settle that case, Cooperman paid the government $4.9 million in fines and penalties and also agreed to an independent compliance monitor at his fund.

…Taken together, those facts do not paint a hopeful picture of two once-proud newspaper chains combining forces to become a bigger and better company.

I don’t think Melchiorre and Chatham have any interest whatsoever in high-quality journalism or have any realistic expectation of seeing McClatchy’s and Tronc’s papers make a successful transition from print to digital. What I see, instead, is the worrisome specter of an avaricious hedge fund operator potentially moving in for a bone-marrow extraction of two downtrodden companies.

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If I was younger and more naive or if I had a nice pair of rose-colored glasses, I might adopt a wait-and-see attitude and be inclined to give Chatham Asset Management the benefit of the doubt.

But we’ve already got a living-color example of what happens when a hedge fund gets into the newspaper business.

I wrote about it in May in a post titled, “You think it couldn’t be worse than McClatchy? Sure could. And maybe pretty soon.”

One possible outcome I speculated about was The Star and the other McClatchy papers being bought by Gannett, the largest newspaper chain in the country. Gannett has trashed its papers, starting with the paper I grew up with, the Louisville Courier-Journal.

I’ve got zero confidence in Gannett.

Another possible outcome I pointed to was a hedge fund buying McClatchy. I cited the case of one hedge fund, Alden Global Capital, having purchased MediaNews Group in 2012, after MediaNews declared bankruptcy.

One of MediaNews’ foremost papers is The Denver Post, which, like The Star, has been hit with devastating layoffs and is a shadow of its former self.

With MediaNews, Alden has engaged in a process called “harvesting market position,” that is, bleeding the papers of revenue and putting nothing back in.

According to The Columbia Journalism Review, a group of Alden shareholders filed a lawsuit in May alleging that Alden “had sucked money out of the newspapers it owns in order to make risky investments in Greek sovereign debt and a troubled pharmaceutical chain, among other areas.”

The journalism review quoted news industry analyst Ken Doctor as saying the suit “provides unusual visibility into the nest of secretive vultures.”

At this point, I don’t see any indication that Chatham Asset Management is anything but a secretive vulture.

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Looks to me like the hedge fund boys are lurking in the water, angling like sharks to get their teeth into what remains of at least two failing newspaper chains…The more I see, the more I think there’s very little chance of a hopeful outcome for our Kansas City Star. On the other hand, I refuse to give up all hope; maybe a miracle is in the works, somewhere.