McClatchy announces contribution of real estate to defined benefit pension plan
The McClatchy Company (NYSE: MNI) announced that as of close of business on February 11, 2016, it has contributed certain company-owned real estate to its qualified defined benefit pension plan. The real estate includes six separate properties, inclusive of certain land and buildings located in Raleigh, NC; Charlotte, NC; Garner, NC; Gulfport, MS; Doral, FL; and Fresno, CA. The properties have been valued by independent appraisals at approximately $47.1 million in total.
The company is leasing back the property from its pension plan for 11 years and will pay aggregate annual rent of approximately $3.5 million to the pension plan. The contribution of the property will have no impact on the company’s day-to-day operations at its newspapers, office buildings and/or production centers at these locations. The property will be managed by WhiteStar Advisors, LLC (“WhiteStar”), an independent real estate advisory firm engaged by the pension plan. WhiteStar hired independent real estate appraisers to determine the value of the real estate contributed to the plan.
As previously discussed, McClatchy expects its required pension contribution under federal law to be nominal in 2016. The aforementioned contribution of real estate is expected to more than satisfy the company’s required pension contribution for the year. The final amount of the 2016 contribution is expected to be determined in the third quarter of 2016 when the company’s actuaries complete the annual valuation of the pension plan.
Pursuant to provisions under its bond indenture governing debt previously issued by Knight Ridder, Inc. (KRI) and assumed by McClatchy in the 2006 acquisition of KRI the company will reduce debt by a minimum of $27.6 million over the next 90 days.
“We view this as a win-win transaction for both the pension plan and the company,” said Elaine Lintecum, McClatchy’s chief financial officer. “Our pension plan will benefit from rental income paid by the company and we expect it to also benefit from price appreciation as these properties hopefully gain in value over time. The company will, in turn, preserve its cash to repay debt.”
Lintecum said, “The company will be able to continue to use the facilities for the foreseeable future and will receive a cash tax benefit of approximately $10 million associated with its 2015 tax returns related to the net tax basis of the property contributed.” Source PRNewswire